Dissecting the National Policy on Software Products 2019

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This post has been created by Monesh Kumar, a third year law student from Guru Gobind Singh Indraprastha University, New Delhi.

Introduction

Technology has already taken over many activities in every economy of the world over some past decades. The contribution of the same cannot be overlooked or be taken for granted. Concerning the same, the bill on “National policy on software products” came into being in the parliament. The Ministry of Electronics and Information Technology (MEITY) released its National Policy on Software Products (policy) on 1 March 2019, with the aim to develop India as a global software product hub. The policy seeks to develop a conductive ecosystem to transform the predominantly service oriented IT/ ITES industry into a technology-oriented products industry. The Ministry of Information Technology (MEITY) is fast-tracking its aspiring Rs5,000 Crores funds-of-funds targeted at locating much-needed domestic capital into India’s software ecosystem, as the government aims to reopen the economy in a phased manner after a two-month lockdown.

The Indian IT Industry has mainly been a service Industry. However, a need has been felt to move up the value chain through technology oriented products and services. To create a sturdy and vigorous software product ecosystem that the Government has approved the National Policy on Software Products – 2019, which aims to develop India as the global software product hub, driven by innovation, improved commercialization, sustainable Intellectual Property (IP), promoting technology start­ups and specialized skill sets. Further, the Policy aims to align with other Government initiatives such as Start-up India, Make in India and Digital India, Skill India etc. in order to create Indian Software products Industry of USD ~70-80 billion with direct & indirect employment of ~3.5 million by 2025.

Salient features

Every policy, legal framework, enactment and statute aims at providing and establishing a definite structure to have smooth functioning of the system for which it is to be or is accounted to be implemented. Therefore, the National Policy on Software Products is composed of following basic features:

Promoting a software products business ecosystem

  1. Furnish a software product registry.
  2. Establish a single-window platform for fast-tracking legal and regulatory issues in trade, including establishment and the termination of companies.
  3. Evolve Harmonized System (HS) for code classification for software products.
  4. Embark tax on R&D investments on domestic software products.
  5. Facilitate active participation of software companies in the capital market.

Promoting entrepreneurship

  1. Set up an incubation programme to provide infrastructural support, provide funds, R&D facilities and so on to nurture 10,000 start-ups, with a focus on Tier-II and Tier-III cities.
  2. Creation of a venture Software Product Development Fund with a corpus of INR 10bn.
  3. Provide grant-in-aid to Indian Micro Small and Medium Enterprises (MSMEs) and start-ups for collaborative research with academic institutes.

Promoting innovation

  1. Introduce 20 challenge grants for solving societal challenges through software products in collaboration with State Governments and industry bodies.
  2. Set up 20 domain-specific software product clusters in existing industrial areas with technical and financial support extended to 500 technology companies.
  3. Set up a Center of Excellence to promote the design and development of software products.
  4. Develop programs for creating talent pools of software product leaders, youth and manpower skilled with futuristic technologies.

 Improving access to the domestic market

  1. Integrate the registry of software products with Government e-marketplace.
  2. Encourage the participation of Indian software product startups/ MSMEs to provide solutions for smart cities.
  3. Promote open Application Programming Interface to encourage innovation and inter-operability in software product ecosystem.
  4. Develop a framework for the preferential inclusion of software products with government procurement.
  5. Integrate Indian software products with India’s foreign aid programs to develop international trade.
  6. Encourage the development of software products to overcome regional language barriers.

 Implementation mechanism

  1. Suggest specific policy measures and initiatives to ensure an enabling ecosystem for design, development, innovation and value addition based on use of information and communications technology.
  2. Encourage State participation and monitor research and innovation.

Reasons for the introduction of the policy

Every policy has a goal behind it to establish a framework or mechanism for the better working of the system. Following are some of the basic reasons of the National Policy on Software Products for which it is aimed to be established:

  1. To attain a ten times increase in the share of Indian software products in the global market by 2025.
  2. To establish and lay down foundation of 10,000 technology start-ups and generate employment for 3.5 million people by 2025.
  3. To create a knack ocean for the software industry, including the teaching to enhance and develop skills of one million IT professionals.
  4. To develop 20 sectorial software product areas furnished with infrastructure, research and development (R&D) and marketing support.
  5. MEITY to enforce this policy on the recommendations of a National Software Products Mission.

Developments

The developments for the fueling of the said policy are aimed to develop India as a Software Product Nation and a global leader in conception, design, development and production of intellectual capital driven Software Products, thus, accelerating growth of entire spectrum of IT Industry of the country.

“If companies like Infosys and TCS show interest in software product development, which have a good reputation, then we would be delighted to have them on board,” “Of course, Rupee capital is more than welcome in the fund, compared to foreign capital.”- said a senior government official from MEITY.

MeitY’s current plan is to deploy the Rs 5,000 Crores corpus into at least 50 daughter funds that would comprise of SEBI-registered Category 1 and Category 2 Alternative Investment Funds, by the last quarter of the current financial year. These daughter funds would, in turn, back startups in the software products sector. There is also a proposal to build a two-tiered fund, which would leverage additional capital to the tune of a further Rs 20,000 crore at the daughter fund level, to de-risk the investment by backing startups in other sectors as well. According to government and industry estimates, SPDF has a potential to create Rs 1, 25,000 Crore in value for India’s software products sector.

Conclusion

India already has its own silicon valley in Bangalore and emerging areas of IT hub in Gurugram, Noida and Pune. It would be a great propellant to the nascent IT industries in India, through the establishment and enforcement of such a policy which aims at building a greater share of Indian software market in the global market and also looking forward to give vibrant choices, support and sources to start-ups to be established like USA, Japan and Germany.

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