India ranks 44th in Global Index of IT Competitiveness; moves up four places

Findings of a new study undertaken and issued by the Economist Intelligence Unit (EIU) and sponsored by the Business Software Alliance (BSA).

INDIA: India ranks 44th in the world in the 2008 IT industry competitiveness index, moving 4 notches up from its 2008 ranking of 48 in the index. India has an overall score of 34.1 on the IT competitiveness index*. These are among the findings of a new study undertaken and issued by the Economist Intelligence Unit (EIU) and sponsored by the Business Software Alliance (BSA).

The study, now in its third year, assesses and compares the information technology (IT) industry environments of 66 economies, to determine the extent to which they enable IT sector competitiveness.

“We are pleased to see that in this year’s index, India has shown strong improvement in its overall IT competitiveness ranking which is a very positive indicator of progress for one of the country’s most dynamic industries.” said Keshav S Dhakad, Chair of the BSA India Committee.

“India has maintained its ability to develop strong talent and maintain a conducive business environment, which is reflective in the six drivers of competitiveness. This year’s ranking is indicative of the progressive initiatives taken by the government & the industry on human capital and support for IT development.”

“Although India continues to perform well in enabling an open, transparent business environment and providing support for IT industry, development of a sound IT infrastructure and enhancing the R&D environment in the country still remain areas, which need strong improvement.

“We are hopeful that with greater government and industry focus in these critical areas, India will not only continue to be an IT power but will become a global leader of IT innovation, products and services. India’s true potential in near future will rest on its ability to indigenously innovate on cutting edge technology, increase domestic investment in R&D activities, promote the value of intellectual property and drive down menace of counterfeiting and piracy”, he added.

“In today’s economic climate, it is critical that governments in the Asia Pacific continue to support the growth of a strong technology sector. The IT sector remains an important engine of economic growth, and economies in the region that are supporting innovation and taking steps to stimulate technology sector output are placing themselves in a strong position to accelerate economic recovery,” said Jeffrey Hardee, BSA Vice President and Regional Director, Asia Pacific.

“However, challenges for Asia Pacific governments remain. Economies like China and India must address issues such as balancing large pools of skilled IT personnel with progress in IT infrastructure. With broadband access becoming a prerequisite for many parts of the IT sector, economies with pervasive broadband penetration have a big competitive advantage over those where the infrastructure is lacking,” he said.

“Additionally, the study shows that economies that have strong legal frameworks for the protection of intellectual property (IP) are generally the IT leaders and score higher in the index. In contrast, economies where IP protection has not been well enforced are not traditionally seen as innovators. Some rely instead on their low-cost labour markets to remain competitive but this is hard to sustain over time. By improving on the factors that contribute to IT competitiveness, Asian economies will not only improve their ranking but also generate long term economic growth,” said Hardee.

Category wise, India has shown improvement in its R&D environment, moving from a score of 0.6, last year to 22.0 this year. It has also shown strong performance in the business environment and encouraging improvements in the legal environment. India still continues to have the advantage of human capital. However fluctuating performance in IT infrastructure needs improvement.

In fast growing markets like India, large pools of skilled IT employees remain a significant advantage but uneven progress in other areas, such as IT infrastructure remains a drag on sector competitiveness. As the Internet becomes all pervasive, slow uptake in broadband and PC penetration has had a significant impact on the IT infrastructure in India.

Robust IP protection remains essential to IT sector competitiveness. As innovation gradually becomes more important than low-cost labour to IT firms in India, improvements in IP enforcement and the overall legal environment would make the country more competitive in the IT landscape.

Within Asia Pacific, India ranks amongst the top ten countries, with the top three positions held by Australia, Singapore and Japan. Coordinated efforts among governments, universities and IT firms in the region are needed to improve the quality of technology training. As in India, robust IP protection and broadband penetration are some of the key concerns in the Asia Pacific region.

"While the outlines of good IT policy are the same in good times and bad, the deep global recession has made it all the more urgent to prioritize support for the technology sector," states Manoj Vohra, Director of Research with the Economist Intelligence Unit. "Governments and industry leaders must pay closer attention than ever to ensure they have the right policies in place to maximise the benefits of a globally competitive IT industry."

Six key competitiveness enablers
According to the Economist Intelligence Unit, six factors work together to create a sound environment for the IT sector:

* An ample supply of skilled workers,
* An innovation-friendly culture,
* A world-class technology infrastructure,
* A robust legal regime that protects intellectual property,
* A stable, open, and competitive economy, and
* Government leadership that strikes the right balance between promoting technology and allowing market forces to work.

Those economies that perform well in these six “competitiveness enablers” generally are home to high-performance IT industries. The study is intended to provide a roadmap for governments in addressing their strengths and weaknesses when it comes to supporting a strong domestic IT sector.

Other findings from the Economist Intelligence Unit research and BSA recommendations include:

* Broadband networks are a vital factor for IT competitiveness, and the competitiveness gap could widen for economies with slower adoption. Technology firms demand fast, reliable, and secure Internet access, and the importance of broadband will grow as more IT services and applications are delivered over the Internet.

* Investment in skills development remains a long-term imperative. Those economies that deliver a combination of IT, business and language skills training will generate a stronger IT workforce.

* Protectionism and support for ‘“national champions” will hinder recovery efforts — and longer term sector competitiveness. Governments must strike a balance between support that encourages industry growth and investment, and that which introduces unfair market practices and protectionism that can harm competitiveness.

* IP regimes are improving in many emerging markets, but further progress is needed. Intellectual property protection remains critically important to IT competitiveness and is a relatively low-cost way of stimulating long-term economic development.