In a year when the chips and bytes were down for most sectors, information technology (IT) was one of the few sectors that recorded a healthy growth rate.
The year will be most remembered by the visit of Microsoft chief executive officer Bill Gates to the country.
In a country where computer penetration is a mere 1 per 1000 against the developed countries average of 30 per 1000, Gates hyped visit provided a big boost in generating excitement over computers.
At the policy level, the highlight of the year was India signing the Information Technology Agreement.
The agreement covers over 80 per cent of the world trade in IT products and commits the country to a gradual phase-out of tariffs on IT products by 2005.
The much-awaited Internet policy, allowing the entry of private Internet service providers (ISPs) and a 33 per cent reduction in Internet tariff rates, was announced.
The flat rate for TCP/IP (which allows graphic displays) of Rs 15,000 for 500 hours has been replaced by three slabs Rs 3,000 for 100 hours, Rs 6,500 for 250 hours and Rs 10,000 for 500 hours.
This is expected to enlarge the subscriber base from the present 40,000 to more than 1.5 lakh within the next two years.
More significantly, the entry of private ISPs will open up new vistas for Internet-related applications in education, electronic commerce and entertainment.
The IT sector saw domestic players shifting from hardware manufacturing to services and support. Two reasons accounted for this shift.
One, unlike its South Asian neighbours, India does not possess any significant competitive advantage in manufacturing electronic items in the absence of large component bases for semi-conductors or integrated circuits. Two, with import duties likely to be phased out, margins in domestic manufacturing will come under further pressure.
Within the information technology sector, the software and services sector grew by 35-40 per cent as compared to the hardware sector, which lagged behind at around 15 per cent.
The software sector is witnessing exciting developments. Entrepreneurs are planning to set up venture capital funds and industry bodies are intensifying their campaigns to meet working capital requirements of software companies.
First generation entrepreneurs like Saurabh Srivastava of IIS Infotech and Raj Saraf of Zenith Computers are leveraging their contacts to garner funds for start up ventures.
At the same time, small but profitable software companies are being eyed by foreign companies. The FI group of UK is in the process of acquiring the Delhi-based IIS Infotech to expand its operations in South Asia.
Wipro-Acer emerged as the major player in the hardware sector following the break up of the HCL-Hewlett Packard joint venture and the dwindling fortunes of PCL.
Another positive develoment during the year was the setting up of wholly-owned subsidiaries in the country by most global IT majors including Intel, IBM Global Services, Imation Corp, Compaq India, Sun Microsystems and Computer Associates.
The buoyancy of the IT sector can be judged from its showing on the export front.
It is all set to repeat its 1996-97 performance, when it recorded a 46 per cent increase to touch Rs 9,500 crore.
The Electronics and Computer Software Export Promotion Council, under the commerce ministry, has targetted an export turnover of Rs 25,000 crore by the year 2000.
In a year when the chips and bytes were down for most sectors, information technology was one of the few sectors that recorded a healthy growth rate
