India: National Policy On Software Products, 2019

Last Updated: 12 April 2019
Article by NovoJuris Legal

The Ministry of Electronics and Information Technology released the National Policy on Software Products, 2019 ("the Policy") aimed at stimulating the software products ecosystem in India. The Policy acknowledges that the Indian IT/ITeS industry is primarily service oriented. The Policy cites NASSCOM's Strategic Review, 2017 which claimed that the global software products industry was valued at 413 billion USD, while the Indian software products industry's contribution stood at just 7.1 billion USD. The Policy aims to develop India as a global software product hub which is driven by innovation. The Policy aims to help start-ups related to software products in conducting their business in India while dealing with regulations and compliances in a hassle-free manner. MeitY had introduced the draft of the Policy back in 2016, which was commended by the industry bigwigs. The salient features of the Policy are summarised below.

The Policy defines a software product as "a programme used or produced by a computer or network which can be stored or transmitted through an electronic medium and offers some form of utility. In addition, such a product can be protected in India through permissible Intellectual Property Right laws and can be commercialized for use through licensing". In order to determine which companies would be able to avail the benefits under the Policy, an Indian Software Product Company ("ISPC") is defined as "an Indian company in which 51% or more share-holding is with Indian citizen or person of Indian origin and is engaged in the development, commercialisation, licensing and sale /service of Software products and has IP rights over the Software product(s)".

Some key missions of the Policy include:

  1. Achieving a ten-fold increase in India's contribution towards the global software product industry by 2025.
  2. Nurturing 10,000 tech startups including 1000 such startups in lower tier cities and towns leading to employment of 3.5 million people by 2025.
  3. "Upskilling" a million IT professionals, motivating 100,000 students and producing 10,000 leaders for the Indian industry.
  4. Developing 20 strategically located clusters to support software product companies with ICT infrastructure, R&D and mentorship.

For achieving the goals envisaged in the Policy a National Software Product Mission ("NSPM") would be established under the aegis of MeitY. The NSPM would be responsible for designing strategies for the development of the industry, monitoring of the special funds created under the Policy and facilitating Government agencies in the promotion of Software Products.

Ecosystem Development

The Policy envisages the creation of an Indian software product registry to provide a trusted trade environment and conception of an environment that allows software product companies to participate in the capital market. A single window platform would be established to allow the industry to deal with regulatory issues pertaining to imports/exports and incorporation/dissolution of ISPCs. ISPCs would also be able to set off any taxes payable with respect to R&D. For the classification of software products in a logical fashion, a model Harmonised System Code would be created.

Promotion of Entrepreneurship, innovation and Employment

A "fund of funds" called Software Product Development Fund ("SPDF") with a corpus of Rs. 1,000 crore would be created for participation in venture fund to promote the scaling up of market ready products, with the ultimate goal of having at least 100 ISPCs with a valuation of Rs 500 crore or employing more than 200 employees. An incubation program would be initiated to provide startups with adequate mentoring, seed fund, R&D and testing facilities and marketing support. Rs. 500 crore would be set aside by the Government to support innovation and research in institutes of higher learning, with the objective to support industry-academia research. 20 dedicated challenge grants would be initiated to encourage the industry to tackle issues related to pressing societal needs such as sanitation and healthcare. A centre of excellence would be set up to specifically promote design and development of software products. The Policy envisions the creation of an "upgradable" infrastructure to help software product startups to identify and tackle cyber vulnerabilities.

Human Resource Development

Considering the pace with which technology is changing, the Policy wishes to enable Indian students and professionals to have future-ready skills. The Policy acknowledges that the existing course curriculum needs to be revised. Further, short term skill development programs and national level competency tests would be developed.

Promotion of Trade

The software product registry (discussed earlier) would be integrated with Government e-market1. The Policy states that the industry would be encouraged to create and use open APIs for improving interoperability of Indian software products and enable incremental innovation. Indian software products would be given preference vis-à-vis Government procurement in accordance with the Public Procurement (Preference to Make in India) Order, 2017. Indian software products would be showcased abroad through various events and specialised infrastructure to be set up in India and abroad. Further, Indian software products would be integrated in India's foreign aid programs. The industry would be encouraged to develop products which would help people overcome language barriers, so that all sections of the Indian populace are included in this digital boom.

Sources:

1. https://gem.gov.in/

2. National Policy on Software Products (2019)- https://www.meity.gov.in/writereaddata/files/national_policy_on_software_products-2019.pdf

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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