Information technology is another one of India's highly dynamic industries, and its most globally competitive, led by iconic companies such as Infosys and Wipro. IT accounted for nearly 8 percent of the country's GDP as of 2017, generating revenues of $180 billion last year. That was up from just $150 million in 1990-1991.
Throughout the 1980s, the sector's growth was severely handicapped by the regulations that permeated the country. J.A. Chowdary, a leading Hyderabad-based Indian IT official for decades, described the environment in the 1980s:
For somebody who wanted to import a computer, they needed to get an import license, which could take six months, and sometimes up to a year. And if the license was approved, the import duty could exceed 300 percent. A lot of companies wanted to come set up software-related activities in India. But because of the licensing requirements and the bureaucracy, they never succeeded in doing so.
The experience of Infosys, India's leading IT company, is instructive. It was founded in 1981, but the government did not recognize "software" as a business, which meant the company could not get bank loans. One of the company's founders, Narayana Murthy, has described the challenging conditions of the 1980s.
Indian entrepreneurs had to cope with a really hostile business environment. For a one-day trip abroad, you needed the agreement of the Central Bank, which took two weeks. To import a computer worth $100,000, one had to wait three or four years and go to Delhi at least fifty times. Obtaining a new phone line took two or three years. During this decade, our growth remained modest. In 1982, we grossed $140,000. In 1991, our turnover stood at $1.4 million.
The small number of domestic IT companies that existed mostly operated in a highly sheltered environment. A 1985 article noted that the federal government's Department of Electronics sought to protect the industry by imposing "the most elaborate set of controls for any developing country." The result, wrote the author, was "an extremely distorted development of the industry."
In 1984, Texas Instruments wanted to establish a research and development facility in India. As a condition of coming, the company insisted that the government grant import licenses within forty-eight hours via a so-called "single...