lack of competition and skewed liberalization....

[Vamsi Musunuru <vamsi@siliconcorp.com>]

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Lack of competition and skewed liberalization has been sighted as
reasons for losing ground against China!!

You may read the article on the net:
http://www.timesofindia.com/today/01busi20.htm

or here it is:
--------------------
A country report by Standard & Poor's has
              cautioned that a successful information technology (IT)
              sector in India does not necessarily portend an economic
              transformation, citing poor public policies and rigid
              institutions as major inhibiting factors.

              The report titled "Information technology in India: Yet
              another missed opportunity," says the beneficial impact of

              the IT industry may be limited to a few modernised sectors

              in an economy still run largely along traditional lines.

              "India has had more success in creating innovative IT
              applications than in building a flexible economy and
physical
              infrastructure that is able to take advantage of them,"
the
              report said.

              S&P's credit rating for India remained unchanged as
              "positive" which was upgraded from "stable" in March this
              year. The report, which the agency's analysts said was the

              first of its kind in looking at a country's specific
sector
              rather than the country as a whole, was necessitated by
the
              growth of India's IT sector which could indirectly affect
              future credit ratings.

              Assessing the long-term impact of the country's IT sector,

              services of which were mostly exported currently, the
              report cited historical examples of scientific
developments in
              the country that largely bypassed the general population
but
              whose benefits were fully utilised by the people of other

              nations.

              "India's restrictive laws and regulations and very-high
trade
              barriers restrain the level of competition in the economy,

              limiting the incentive for firms to boost productivity
through
              the use of IT," said Joydeep Mukherjee, S&P's Sovereign
              Group analyst, and also the lead author of the report
              released here yesterday.

              He wrote in the report that the limited and sometime
              non-existent commercial orientation of public-sector
              enterprises in the country also led them to ignore the
              opportunities offered by IT. As a result, the report said,

              public sector units, ranging from government-owned
              commercial banks to state electricity boards, continue to
              operate with antiquated technology and have little
incentive,
              let alone funding, to upgrade.

              "It's ironical that Indian firms and public institutions
are
              slower than their foreign counterparts to take advantage
of
              IT products, most of which originates in their own
country,"
              Mukherjee told India Abroad News Service, adding
              "India's long-term competitiveness against other
countries,
              especially China, may suffer in relative terms."

              The report questioned whether more of the benefits
              resulting from IT development in India will flow to other
              sectors of the Indian economy or to companies in other
              countries.

              It stated that a faster pace of economic reform, including

              privatisation, would maximise IT impact on the country's
              economic growth, exports and living standards. This along
              with a reduction in the fiscal deficit of the country's
state
              and central governments would improve its overall credit
              rating.

              "Failure to reform the country's bloated public sector and
to
              further deregulate the private sector could keep IT as a
              small, modern enclave in a still-poor economy," the report

              cautioned, adding "under such a scenario, the country
              would miss a rare opportunity to transform its largely
              backward economy and alleviate poverty."

              On the brighter side, the report said IT was changing
              political attitudes toward business and foreign
investment.
              "Its (IT's) success will further erode resistance against
              foreign investment and should contribute to liberalising
rules
              for such inflows in unrelated sectors."

              Noting that growing exports from the IT and relates
              services sector were likely to play a growing role in
              enhancing India's external resilience, the report said
that if
              properly promoted, the sector could have a similar impact
              on India as the shift in foreign direct investment (FDI)
into
              export sectors had on other Asian economies in the early
              1990s.

              "Low FDI is one reason why Indian exports grew by only
              130 per cent during the last decade compared with 250 per
              cent growth in Chinese exports and over 200 per cent in
              Philippine exports during the same period."

              Noting that the IT sector was sure to flourish in the
future,
              the report said that the extent to which India as a
country
              and its credit rating also flourish will be determined by
the
              willingness of its public and private institutions to take
full
              advantage of its tremendous potential. (India Abroad
              News Service)

--
Sincerely,
Vamsi M.



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