In Indian economy, manufacturing sector occupies a vital position. It accounted for nearly 15.4 percent of country’s real GDP and employed 12 percent of India’s Labour force during the financial year 2011-12. The sector also contributes significantly to country’s exports and has registered a robust export growth rate of 20 percent over the last 5 years. However for the last two years India has been witnessing a fall in the share of international exports, especially to USA where the exports share of India has plummeted from 89.1 percent to 74.2 percent. Such downfall in the exports of Indian products has become a cause of concern for the nation.
India faces tough competition in exports from its Asian counterparts, especially China which holds 19.5 percent in US markets share as compared to India which occupies only 1.6 percent market share. Besides China India face tough competition from countries like Bangladesh, Thailand, South East Asia and other SAARC countries. But now there is an option for Indian exporters to retain and increase their share in the US market.
IT compliance for exports to US market
Information Technology (IT) has become an important asset of every industries and enterprises today. In the current age of severe competition, enterprises are forced to use all possible tools including IT (hardware and software) to enhance their competitive position in the market and improve their design capabilities, operational efficiency and Supply Chain Management (SCM).USA is one of the most favored export destinations for traders, due to its strong position on international forum. However they need to understand the current export ecosystem in the US market, in order to retain and expand their share, this is especially important for Indian exporters. USA has always been keen on its compliances laws and regulations and has further moved in this direction with enactment of a new IT compliance law called the “Unfair Competition Act” to protect the interest of the legitimate IT users and to ensure that illegal IT users do not enjoy any unfair cost competitive advantage over the legal IT users. The law was passed in two sates namely Louisiana and Washington of USA, 36 states and 3 union territories in the US have also written to the Federal Trade Commission (FTC) for better enforcement of UCA and to ensure that products manufactured out of only legal IT is sold in the US market.
Should Indian exporters worry?
The answer is no, in fact, UCA is an opportunity for Indian manufacturing exporters to retain, expand and grab their share in the US market. India has low rate of piracy as compared to China who otherwise has a high technology base and strong position in the US market. Chinese products get favorable response in the world market due to lower prices, thus giving rise to a tough competition. Now governments worldwide are working towards creating legitimate trade environment where those who use illegal IT should not get cost advantage over those who use legal IT.
"According to the US census on her end use goods imports, USA has imported goods worth $425 bn from China compared to $40 Bn from India, $20 Bn from Indonesia, $26 Bn from Thailand and $25 Bn from Malaysia etc. Also we need to note that China has an IT piracy of 77% compared to India, Indonesia, Thailand and Malaysia with an IT piracy of 63%, 56%, 72% and 55% respectively, as per global IT piracy study of 2011 by BSA."
As per 2012 Global Piracy Study by business Software Alliance (BSA), India has a low piracy rate as compared to China (which enjoys significantly larger share in the US market) and other competitors, this is a good news for Indian exporters as with UCA in place, US buyers would prefer to trade with countries with lower piracy rate.
As per a study titled “Emerging Opportunities For Indian Manufacturing Exports” jointly done by Indian Institute of Foreign Trade (IIFT) and ASSOCHAM with low IT piracy rate in India, Indian exporters have an opportunity in the US market which can be realized with compliance. The study which was launched by Dr. EMS Natchiappan, Minister of state for Commerce & Industry and other dignitaries, gives a complete overview of UCA and its possible implications on Indian manufacturing sectors.
What needs to be done?
As per Mr. BP Singh, Senior Technical Advisor, First Link India Services, “On failure of the exporter to prove compliance if held in US, not only the firm has a chance to lose this opportunity but also lose their existing share in the US market to the competent supplier. Therefore it’s high time for Indian exporters to take up IT compliance as a serious management activity and gain market share from other non compliant competitors taking first mover advantage”
After realizing the potential of genuine IT in enhancing the competiveness of industry, the first step can be creating and managing the appropriate IT infrastructure in the enterprises. To start with an audit of software assets vis-à-vis their deployment and their licensing can be quite helpful to ensure that only legal IT is used in their enterprises. Third party audit can also be conducted to optimize the ownership of the software and hardware assets.
Further, a BSA launched portal Verafirm registry viz. www.verafirm.org can be effectively used by firms to register themselves, log their software asset details and be awarded the verafirm registered digital badge symbolizing their authenticity and allegiance to the legal IT sphere. This also enhances the visibility of exporters to the US market.
It has been proved through many studies that the genuine software costs you less as compared to the pirated or stolen IT if we take into consideration the loss of critical data, loss of man hour due to crash down of computer systems. To fully leverage on the power of Information technology in increasing the efficiency, an enterprise need to deploy only genuine and licensed software. Software publisher provide required support on properly licensed software. All enterprise must understand the ill effects of using illegal or pirated software on business efficiency, reputation and ultimately on the whole business.