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Monday, December 25, 2000

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Y2K -- eventful for Indian IT industry

Vipin Kumar

NEW DELHI, Dec. 24

CRASHING down of dotcoms, passing of the IT Act, high profile visits by IT big guns and spiraling technology stocks settling down to realistic levels were the major facets of the Indian infotech industry in 2000.

The year also witnessed software exports being taxed, three Indian infotech companies getting listed in US exchanges and a number of countries wooing Indian software talent.

In the global arena, some of the most significant events were the crash of the Nasdaq and other stock exchanges, a Federal Court's ruling to break software giant, Microsoft, into two for breach of anti-trust laws, and the widespread mayhem caused by a vi rus named `I Love You.'

World over, the IT industry woke up to the new millennium with some anxiety over the Y2K bug, but it was unfounded. India, too, had a smooth roll over to 2000, as there were few reports of any break-downs due to the bug.

A good number of Indian firms had undertaken Y2K repair work -- we earned $2.3 billion between 1996 and 1999 in Y2K work -- and the trouble-free entry to 2000 was yet another proof of our software capabilities.

The pessimists, who forecast a slowdown for the Indian software industry in the post-Y2K scenario, were also silenced as the industry continued with its high growth rates throughout the year.

Another significant event of the year occurred when the Union Budget for 2000-01 brought all exports, including software, under the Income-Tax net by phasing out tax benefits in a staggered manner.

However, the decision not to dole out any tax benefits to companies registered with the Software Technology Parks of India after March 31 led to some consternation in the industry. Effective lobbying by the software industry, led by Nasscom, later result ed in the Finance Ministry agreeing to a sliding scale pattern of taxing new units until the year 2010.

A watershed event of the year was the enactment of the IT Act 2000, which put India among a group of 12 nations which have similar laws to deal with various legal aspects of the new economy -- cybercrime, digital signature and e-commerce.

Subsequently, the Government also framed rules under the IT Act and appointed a Controller of Digital Signature Certifying Agencies. The IT Act, which makes digital signatures legally valid in the country, is also the biggest achievement of the one-year- old Ministry of Information Technology.

In April this year, the technology-heavy Nasdaq crashed, triggering off a domino effect in stock markets all over the world. Software scripts, which were quoting unprecedented highs, started coming down to earth, flooring many an overnight billionaire.

The bourses became realistic. Until then it was a perpetual bull run with IPOs by any software company being lapped up. It is noteworthy that there were not very many IPOs this year after the crash -- and they just scrapped through. Despite this meltdown , three Indian IT firms managed to get listed on the US bourses this year, including Rediff.com, which became India's first portal to list on the Nasdaq. Wipro and Silverline Technologies got themselves listed on the New York Stock Exchange during the ye ar.

The downfall had another long-lasting impact. The much-hyped dotcoms could not really recover from the fall. As the first round of venture capital money was over, many of them were gasping for breath, as venture capitalists were no longer generous with f unds.

The result: Retrenchments, downsizing, mergers and even shut-downs are the order of the day in the world of dotcoms which now face the ground realities of business. Eyeballs and hits are now in the backburner of a dotcom; making money is the need of the hour.

The correction among dotcoms also seems to have led to introspection among venture capitalists, who too, had been prone to investing in any proposal that came their way. Although there are more funds available now -- according to estimates, about $5 bil lion by this year end -- venture capitalists are very careful in selecting their investment choices.

A series of visits by global leaders of the IT industry was another aspect of the year. Microprocessor giant, Intel's President and Chief Executive Officer, Dr Craig R Barret, visited India in May and announced a $100-million venture fund for the country .

Following Dr. Barret were Mr Jerry Yang of Yahoo!, Mr Robert Bishop, Chairman and Chief Executive Officer of Silicon Graphics Inc (SGI), Dr Arun Netravali of Bell Labs, Mr Michael Dell of Dell Computers, and the god of geeks, Mr Bill Gates of Microsoft.

Though all these visits put India on the global notice board, the visit of the year was undoubtedly that of Mr Bill Clinton, the President of the US.

That he stressed on Indian's prowess in software throughout his trip once again reinforced the ability of our people. It is also said that the visit took place thanks mainly to our software capabilities.

Along with the US, which later hiked the H1-B visa cap, a number of other countries too pitched in aggressively to attract Indian software people. They include Germany, Japan and Ireland.

And now even as the year is coming to its end, yet another uncertainty is dawning on our software industry. The US economy is anticipated to undergo a slowdown in the coming months, and it is feared that this might affect the Indian software industry.

But the new year brings fresh hopes; and let us hope for the best.

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