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An export house, trading house, or star trading house is the status certification assigned to Indian exporters if they achieve certain export performance.Status Holders are business leaders who have excelled in international trade and have successfully contributed to the country’s foreign trade. Status Holders are expected to not only contribute towards India’s exports but also provide guidance and handholding to new entrepreneurs. Export House certification increases the credibility of the Indian exporter in the International market and creates a sense of trust in their company.Note: In FTP 2009–14, categories were defined as Export House, Trading House, Star Trading house, etc. However, in the current FTP, they are now defined as One-star export house, two-star export house, three/Four & Five-star export house.Eligibility criteria to get the Certification:-The exporter must have the Import – Export Code (IEC).Exporters have attained a certain level of export performance.Now, it may come to your mind that what export performance should I have to get the certification,Find below the chart I have prepared and the category of the certification depending on the export performance to be achieved in the current plus previous three Financial Years.Double weightage Concept:-The double weightage concept applies to get only a one-star export house certificate. It does not apply to other status holder categories.An exporter who meets any one of the following criteria can get double weightage benefit:Micro, Small and Medium Enterprises (MSME) as defined inMicro, Small and Medium Enterprises Development Act, 2006Manufacturing units that operate as per the ISO/BIS standards,Business units situated in Sikkim, Jammu & Kashmir, and othernortheastern statesBusiness units situated in the Agri Export Zones.Only one-time double weightage is allowed for a shipment in given categories.For example:XYZ farms produced export quality Spices. Their combined annual turnover for the previous three financial years and the current fiscal year was 1.5 million dollars. The minimum turnover required for the One-star Export House category is 3 million dollars. However, They had an MSME/SSI Certificate. In such a case, they can be granted a double weightage benefit. So with the grant of double weightage, their turnover of 1.5 million will now be calculated as 3 million dollars (1.5 x 2=3), and thus they will be granted the Status Holder Certificate of One Star Export House.So is my Company eligible for Star Export House?If you fall under the Double weightage criteria, then the total export turnover in the current plus the previous three FY should be a minimum of 1.5 million USD to get a one-star export house certificate.If you do not fall under the Double weightage criteria, then the total export turnover in the current plus the previous three FY should be a minimum of 3 million USD to get a one-star export house certificate.Watch this short video on the Export House Certification/Status holder certification which explains what exactly is Star export house certification and the eligibility criteria to get the certification its practical benefits & How to apply for itBenefits of Export House Certification/Status holder certification:-Authorization/License, import-export customs clearance is issued to status holders on the basis of self-declaration.Norms fixation for Advance licenses may be done on a priority basis.Exemption from submitting BG (Bank Guarantee) under Advance/EPCG/DFIA Schemes under Foreign trade policy.Compulsory negotiation exempted for export documents through banks;Two-star export house certificates and above are allowed to build Warehouses as per guidelines of the Department of Revenue(DoR).Three Star/Four Star/Five Star status holders (Manufacturer Exporters) will be enabled to self-certify their manufactured goods as originating from India (Certificate of origin) to qualify for preferential treatment under following preferential trading agreements (PTA), Free Trade Agreements (FTAs), Comprehensive Economic Cooperation Agreements (CECA), Comprehensive Economic Partnership Agreements (CEPA).Permitted to export freely exportable items on free of cost basis for export promotion subject to an annual limit of Rs 10 lakh or 2% of average annual export realization during the preceding three licensing years whichever is higher.Easy access to loans under various Government Schemes.Application Procedure:-The application shall be filed on the DGFT Website with the help of Application form ANF 3C using a Digital signature certificate.As per the Latest Notification (Trade Notice No. 41/2020-21 Dated 15th February 2021), The applications are required to be submitted online through the importer/exporter's dashboard on the DGFT Website for the Certificate. No Physical submission of the document is required.Export House Certificates/Status Holder Certificates would be issued electronically with a QR code and a Unique Document Identification Number(UDIN) for electronic verification.The entire process is designed to be paperless and contactless for the certification. Any communication, correction, clarification, as well as approval of submitted applications, would be electronic from 22.02.2021 onwards.The Following Document needs to be uploaded online -CA Certificate as per annexure,An export statement certified by a chartered accountant,Self Certified copy of IEC,Valid RCMC,Pan card of the firm.No Government fee required to pay for the certification. The DGFT will review the application and issue the certificate.Please look at the image below explaining the steps involved in the Application Procedure -[To know more about the Documents required, step by step application procedure, FAQ’s about the Star Export House Kindly refer —-> Star Export House - Meaning, Eligibility, Benefits & Procedure]We are India’s No. 1 Import-Export Consultant, provide services related to DGFT like benefits on the export under Government incentive schemes such as MEIS/SEIS/RoDTEP Scheme, Issuance and redemption of Advance Authorisation, EPCG, DFIA, etc and Certifications such as Export House, AEO, Free Sales Certificate, etc.Get in touch for more details.We would appreciate your comments and views on the above topic.

Indian economy has already been going through with slowdown for the last many quarters for all the segments. COVID 19 Pandemic spread/feed have added a fuel to fire in our economy. However, our Indian economy could have been revived with all great efforts of Manufacturers / Exporters / Traders & working professionals, if this deadly pandemic was not exported to us from our neighbouring country. COVID 19 has destroyed all our hopes for reviving the economy for time being and it has made our economy even worse on many fronts. Various internationally known rating agencies gave their view on the Indian economy and accepted that the Indian economy has put a step forward towards the recession. Now there is no denying in the fact that the Indian economy has entered into the recession more or less, now we should pray that recession does not turn into depression for the Indian public.Whatever profession people are pursuing in their noble life, whether it is highly rewarding or not, highly skilled or semi-skilled, big or small, they are all parts of our economy a country called Great India on this planet. These all collectively efforts put together, we can say economic activities. These economic activities such as Profession, Employment, Businesses all put together are linked with each other by an integrated chain. As you know due to lockdown in India at present, Industry, Educational Institutions, Aviation, Tourism & Hotel Industry except medical & health services everything we find is closed per advice from the Government of India. Daily wage earners went to their home state from the cities, industry & trade activities are closed, imports and exports are shrinking. All these activities are linked with each other in an integrated chain and now due to lockdown these all activities are stinking severely. If the single pearl in this integrated chain will trickle then this whole chain will collapse and the whole economy will suffer. For example, the daily wage earners who went to their home state due to this lockdown, if they do not come back after ending of lockdown this will directly affect the entire industry very severely and especially MSMEs. Every pearl in this chain is very crucial for our economy. Whether it is banking sectors, private sectors, industry, etc., Government of India must look after these all pearls meticulously if they want minimum loss due to the COVID 19 and should initiate right steps by taking advice from leading economists, industrialists, leading trade associations such as EPECES, FIEO, FICCI, PHDCCI, etc. to uplift and boost the Indian economy.Government of India and Reserve Bank of India came up with their strategy to combat the slowdown of the economy and against COVID19. Our Honourable Prime Minister Mr. N Modi, Finance Minister at different platforms, has announced INR 15000 Crore relief fund and INR 20.00 lakh crore financial relief packages for the various parts or our ailing economy. RBI has reduced CRR, SLR and has cut the Repo rate and all the possible things they did but this is not enough for the mammoth 130 billion population of India. Merely investing this much mammoth amount of money into the economy will help very meagrely but would not help the economy coming out from the recession. This will certainly help our poor brothers at an early stage but for a longer duration, it would not help the Indian economy.Industries will be affected heavily due to this lockdown because all major industries are manufacturing goods that required raw materials and major raw materials are imported from foreign countries such as USA, Europe, and China. All domestic & international aviation industry is closed. Shipping industry is not sailing in the rough sea. Customs / Port officials are not working to their capacity. The industry will be required to put immense efforts to restart after lockdown.COVID 19 menace has damaged the economy and will continue to damage for a long period but this menace did many good things though such as it has improved the air and noise pollution etc., and this is a good trait for the earth.The COVID 19 pandemic which is considered to be a historical health disaster equally seems to create bigger challenges in the growing economic landscape of many afflicted countries of the World. That’s a critical stage of the current economy where India is on the highest crunch of witnessing a downturn in many growing sectors like Aviation, Automobiles, Health, Agriculture, Fisheries, Banking and I.T / ITeS which are currently in recessions due to national and worldwide lockdown and the slowdown of their economies in most of the countries. Even as a whole country will be facing much bigger issues on bilateral trades which are more vital for boosting our Indian economy in time to come. Most contentious issues in post lockdown phase are travel and tourism, medical tourism and FDI which have affected major economies like U.S.A, Germany, Italy, Spain, Germany, France, Canada, Australia and China had the worst hit of this pandemic on their economy which will lead to unexpected downfall due to several restrictions of western countries on travelling and trade. But still, there is a silver lining for India is that its GDP is largely driven by Agricultural product which contributes to the tune of 60% of national GDP which creates a high degree of optimism for expecting healthy monsoon to revive every sector by end of the current year.It's now no lie to anyone in the world that the Indian Economy has slowed down from the last many months. We are missing and lacking in the reforms along with global market conditions shaking us further like anything due to lack of will of our political masters.The economy depends upon both internal and external conditions. Even there are impacts on India from China – USA – Europe – Israel – Africa – South Korea – North Korea – Japan trade wars between different countries and other global economic conditions. An example can be Germany which is one the verge of technical recession where one of its big leading Banks of international repute Deutsche Bank fired recently 18000 plus people worldwide from its master payroll.Our Nifty and Sensex are more volatile then what we can think of our investors, any bad or good news can bring them to low or up during trading hours of the market of the day.Our government will need to push long-delayed reforms at the earliest with fiscal discipline for everyone. No free lunch or subsidies of any nature to be granted in near future be loan waiver to farmers, free electricity to farmers & rations.It seems we (Government of India) are not yet ready to take steps on the bleeding companies by putting them on auction or sales block such as BSNL and Air India which are a big burden on national exchequer and public. It is very sad and hard fact, Truth in India is not such straight forward like we think and always believe.Our governing bodies have made people less worried about economics reforms then social reforms. The government, in its second tenure, has changed its gear more towards social reforms then economic reform and for this reason; our business rating is slowly going down.What are the options or alternatives available to India? How to revive Exports from India?What India should do to realize Export of Products and Services to make it few Trillion Dollars?Demand for Products and Services would be a certain cure for our current economic situation in India, due to low installed capacity utilization, low investments, fewer job creations for our youths, low productions with poor quality and quantity of products, and above low GDP growth rates.There is no better way to pump up demand for Industrial/Consumer products than creating valuable orders being received by us from all over the world by Indian Exporters.India has a great potential in every aspect to target Export Turnover of few Trillion US Dollars by 2025, up from the current approximate of around INR 7.01 Lakhs Crore for Financial Year 2018-19. To achieve this mammoth target, a combined effort is required from everybody (Government of India, Trade Associations, Manufacturers, Labour Unions, & Traders) to push up Indian exports on the world market to capture a sizeable slot of world trade where India’s share in world trade is 2% approximate.To achieve/increase a few trillion US Dollar market, the following steps are required on a war footing basis to come out from COVID 19 and economic recession stress for India on an urgent basis.We have to increase our focus and promote those manufacturing products which world buys most at present such as Bulk drugs, Engineering, Electronic, Telecom, Computer accessories, Organic chemicals, Food items, Leather Products, Handicrafts & Garments so on with a list of goods never-ending for goods to export from India as a preferred destination for the world.The Government of India must and have to announce industry-specific incentives schemes with required Tax Breaks for exporters and should appoint anchor – a professional group of firms industry-specific and seek their help and guidance, suggestions to give solid push kick-start export with their wide network available to them all over the world (Global Value Chains).We have to promote with level best ability our Textile (ready-made garments of all types) / Leather Products and our other labor-intensive type industry products where manufacturing base is shifting to Bangladesh, Sri Lanka, Thailand, Philippines, and other low-cost countries from India. A manufacturing push (Make in India / Skill India) will also help in creating diversification across the country and certainly, it provides growth in our Services Sectors Industry, such as Software (IT / ITeS) exported by us to the leading developed countries such as USA, Canada, Germany, UK, Australia, and Middle East countries like UAE.India must invest highly in Global Value Chains with ready to trade infrastructure. India’s production in electronics, telecom, and high tech products as our Ports – Customs Departments do not work hand in hand but on the other hand, they also do not guarantee quick entry/exit clearances of respective products from these said departments. This is highly critical as spare parts and required assemblies of such high tech products are being manufactured at present in many countries across the world today. Delay in shipments arrival/clearances – exits at one of the Port disrupts the entire production schedule and this encourages shifting of manufacturing base to another country. Our Ports / Customs Departments enjoy ample goodwill for them in the international trade arena, how to provide solutions at any given time to our exporters, importers, and common businessman for no fault of them many times.To improve on this area, India needs to automate all its Airports / Ports and Customs Department operations with minimum possible human intervention across the country and should encourage Green channel clearances for the majority of consignments being received for manufacturing or the export purposes. We have to match and improve the turnaround times of Aircraft / Ships with the best global parameters being followed by our other competitive countries. This will ensure quicker transactions for our exports and will allow us to better use our infrastructure and a great extent will help us to reduce our cost which will benefit everyone. This will help us to put our efforts in a better way and do the work in a highly professionalized manner.India must set up a new online digital platform (user friendly) for processing all regulatory – statutory and commercial documentation needs of all exporters and importers in a highly professional manner with no stone left unturned. This will encourage exporters to file their all required information/documents online especially with our Customs, DGFT, MOC&I, RBI, Shipping companies, sea, and our airports and with all required commercial banks for Letter of Credits, FIRC & eBRC. The filing of information should be only at one place not at several places for the same information being submitted end number of times to the different departments.We should improve/follow the best quality standards available which no country should be able to meet or match with us on quality products being produced from India. Many of our products fail world quality tests due to the common traces of pesticides/pathogens, illegal dyes etc. We need to redesign our quality standards/infrastructure to help exporters move to higher-end quality products of international repute and protect India from the substandard imports being dumped from other countries.Institutions responsible for developing quality standards, setting guidelines for inspection of products, testing, and quality certification must adopt best practices being followed by the most developed countries of the world in this regard. We need to set up more globally accredited testing laboratories, enhance the capacity of Indian laboratories and sign the Mutual Recognition Agreements in this regard with our partner-friendly countries mutually accepting each other products with certain predefined set parameters. India’s agriculture products such as Dairy / Meat / Fruits and Vegetables will be able to penetrate in the Middle East, African, European, and South American countries in a better organized professional manner to earn more and more fully convertible foreign exchange for India.India must reduce cost differentials to stay afloat in international business, as our exporters pay 5% extra on transport, (due to high Excise / Local State VAT on petroleum products) 5% on capital goods, 2 to 5% blockage of working capital due to very tedious tax laws being followed (GST, High Income Tax Rates) and 3 to 5% due to higher Real Effective Exchange Rates (REFR). Working capital interest rates from commercial banks are too high in comparison with our competitive countries even by providing security cover for the loan amount. This extra cost of 15 to 20% increase our product cost and our products become un-competitive and leave our exporters to scratch their head high – dry in pain all the time. Government of India try their best to meet part of the cost disability through the export incentives schemes which have to be taken care of by keeping in mind WTO norms. GST Returns process and to get a refund from the department is another pain in the neck for exporters.Incentives schemes announced by the Government of India, (MEIS / SEIS) exporters find them-selves all the time at receiving end as lots of paperwork has to have complied with this. Incentives schemes should be time-bound manner settled with minimum paperwork at least for the star export houses.Protect the interest of exporters in foreign markets in the best possible manner. India has many USFDA approved pharmaceutical units across the country, yet our drug quality is always suspected. Big pharma companies of the USA and Europe always push their Governments to put harshest possible measures to discourage entry of Indian pharma companies in their domestic market. Indian Embassies Trade officials posted abroad must take such issues with their counter-part to take care of Indian pharma companies' interest with respective foreign regulatory bodies.India must promote Retail Exports. Export of small quantities of customized products (such as Birthday / Give away articles / Toys / Garments / Handicrafts or any other life event products) through postal / courier is the new form of exports have taken by all over the world especially by thousands of students, house wives, and small firms. They export with minor capital and resources available at their disposal, such as Handicrafts, Artificial Jewellery, ethnic garments – wears, decorative paintings, ayurvedic products, sweets, brass, table decorative glasses and so on various other products. Considering the depth of India’s artisanal expertise of average Indian, each product can turn into billion US$ plus for India in the shortest possible time, provided hardships at our post office or courier companies, restrictions from Reserve Bank of India, and AD Banker is removed. Such exports should be allowed hassle-free up to the value of INR 5 Lakhs with no declarations (EDF Forms) or restrictions to increase share for India in world trade.India must promote Tourism / Medical Tourism for the betterment of the economy as it is another sun rising business opportunity provided we promote the same in the right prospective manner for the Middle – East Asia and European countries by building world-class ‘The Best’ hospitals in India. Such facilities can generate approximately 10 billion US$ for the Indian economy in the shortest possible time, with no limits for service industry business growth by leap and bounds and few thousand new job opportunities in hospitals spread all over the country.Developed countries like the USA, UK, France, Russia, China, Germany, China, and Sweden thrives their economy on sale and export of Defence – hardware products export, whereas India’s defence export is hardly visible. We have large Ordnance factories, HAL, BEL, BHEL, & BEML across India and they must be exploited in the best possible manner to export their manufactured products especially to developing countries like - Asia, Africa, and South American countries.Natural resources such as Mine Ores which are available in plenty across India, by converting those (Iron Ores) into finished products (various types of steels & other metals) certainly we can yield more foreign exchange for India. (Example – Japan importing mine ores from other countries and converting the same into finished products to help their economy.)Government of India should encourage exporters & their bodies to tie up with leading retail chain of super markets of the world like – (USA - Albertsons, Walmart, Target, Super Value), (EUROPE – Carrefour, Tesco, Sainsbury, EdekaZentrale), (Australia – Whoolworths, Coles), (Canada – Walmart, Kroger, Costco, Wholesale, Target) in where China is leading supplier to all these retail chain stores of the world.Government of India should encourage and enter into Free Trade Agreements with trade associations or group of countries such as ASEAN (Association of South East Asian Nations – Thailand, Vietnam, Indonesia, Malaysia, Philippines, Singapore, Myanmar, Cambodia, Laos & Brunei), NAFTA (The North America Free Trade Agreement – Canada, Mexico, United States of America), SAARCS (India, Pakistan, Sri Lanka, Nepal, Bangladesh, Bhutan, Afghanistan & Maldives), European Free Trade Association (Iceland, Norway, Finland, Switzerland, Sweden, Germany & UK), & BRICS (Brazil, China, India, Russia, South Africa) & SAFTA. We should give and encourage those countries with MFN status on an urgent basis that always prefer to import or source their supplies from India.Dedicate freight corridors such as Railway for the fast movement of goods at economical rates and better road connectivity to all Ports will make certain differences and mindset of everyone have to be changed involved in Export / Import or any other services.India is the only country in the world, where our exporter's service is not recognized the way it should be, as they earn valuable foreign exchange and help to build a sound economy.Due to breakout of COVID 19 and slowdown of the world economy, many companies are going to shift their manufacturing base from China to many other friendly and low cost, quality-conscious countries, and where India should not miss this golden opportunity to attract their entire manufacturing base along with large foreign investment for to improve the health of our economy.The government of India should consider and take some steps on an urgent basis to help our exporters to tide over the crisis of slowdown and COVID 19 breakout and lockdown who are the backbone of Indian economy.# Government of India should provide relief /allow to SEZ Units to sell their products in DTA to fully utilize their manufacturing installed capacity. SEZ Act – 2005 (Sec-30) should be modified suitably to provide relief to all SEZ units. Income Tax benefits should be extended beyond 30/06/2020 (Sun-Set Clause) or if not possible due to WTO, than rate of Taxes should be reduced for SEZ / EOU 100% units.# Exporters are not able to receive their payments in time from their respective overseas customers. Working capital / financial position of all exporters is very tight & most of SEZ / EOU units are under heavy debt/overdraft from their commercial banks. Interest on overdraft for the lockdown period should be completely waived off or deferred for a period of not less than from 18 to 24 months.#Government of India should announce a liberal loan policy with a lower rate of interest. This should be introduced at the earliest to meet certain statutory committed expenses such as payment of Salaries & wages, Rent, Electricity, etc. Exporters already enjoying credit limits with their bankers, their limits should be enhanced by 25 % to 50 % depending on their need basis with minimum paperwork and collateral security cover for this overdraft facility.#Pre-Post shipment, Bill discounting limit should be relaxed, so they can take the required steps to enhance their export activities.# Bank Guarantees issued by banker should extend this facility with minimum margin as a collateral security cover for this should not be more than 15 % to 25 % of the total bank guarantee value and charges should be the bare minimum.# Write-off permission should be more exporters friendly rather than Govt. officials. An exporter is the best judge to what amount can be written off from the books based on his dealings and experience in the trade with respective customers. His / Her or management decisions should be accepted with due respect as their business or goodwill which have suffered the most with all hardships from their Authorised Dealer Banker and Reserve Bank of India for not receiving payment of export within the prescribed time limit of export taking place. Other agencies provide only mental torture and harassment with more financial loss and waste of precious time for exporters. Govt. of India has appointed public servants for the welfare of all and every citizen, but it is very difficult to meet them that too on certain days of the week and time with specified official approval, whereas rather serving or helping to sufferer, they do their best to delay and create more confusion for the work. Write-off amount permission should be given to the regional offices of Reserve Bank of India, where the exporter registered office or exporter works is situated or from which banking branch transactions have taken place.All commercial bank have specified branches who deals in a foreign exchange transactions, customer accounting branch is some other part of the city, and their approving officials / seniors from the legal department will be in different cities. If something goes wrong with the exporter for collection of payment, it is the exporter who has to face the brunt of every department and have to run from pillar to post to get work done and satisfy each and every one to the satisfaction for the job concern.# Authorised Dealer Banker should reduce their high bank – service charges for the period being extended by them for overseas payment collection from the respective overseas customer if there is a delay in collections per time limit specified by Reserve Bank of India.e-BRC should be issued to the exporters at the earliest so they can file their incentive claims (MEIS / SEIS) if any. Bank charges on issuance of e-BRC should be reduced for all exporters.# Government of India should not burden the exporters with service charges for (Bill of Entry, Shipping Bills, Softex Certification, AMC Charges for the maintaining of the system by NSDL and STPI, etc.) as the export industry is already facing the slowdown of the world economy, and breakout of COVID19 and lockdown of all commercial activities.# Government of India should help and take care of enforcing contracts in international business deals, and our judicial system should deliver judgments at the earliest in a time-bound manner. Special courts should take care of the export/import business if any dispute arises.# GST still needs to be reworked and revisited with changing slabs of taxes bringing more and more commodities into lower slabs to enhance consumption and to give a boost to the economy.# Governments of India should start doing reforms on urgent basis with various sectors such as land reforms, labour reforms, and enforcing contract reforms, etc., it is time they must become decisive. They should push the public to do some business with a focus to earn some profits and undertaking for assets creation than using for maintaining fiscal deficit.# Government of India officials should be more accountable for their jobs and decisions. Audited Balance Sheet & Profit / Loss Account statements of the respective unit for respective financial year should suffice all accounting reports purpose for various departments and no more information should be asked from the companies, as Monthly Progress Reports, Quarterly Progress Reports, and Annual Progress reports are being submitted, still, many a times, the same information is being asked to resubmit again in different format for various department purposes.# Our manufacturing sector is very poor for the last many years. We should start bringing reforms to it. We need to give more importance to ‘Make in India and Skill India’. We need to provide a boost to our exports which can be possible only if our manufacturing sector gets improved with skilled labour and applying / using with latest technology.# Our exports have backfired us very badly. Our auto sector is reeling badly due to weak consumption and regulatory changes leading to higher costs, new energy versions, and credit unavailability exacerbated by the NBFC crisis of poor funding of all commercial vehicles.# People need to be left more money in their pocket for creating demands for various products. Banks and Reserve Bank of India may have to step-up on this issue to boost our economy. There is a long term demand to give more money into the hands of people to spend more but still, the direct tax code panel recommendation, removal of old income tax slabs with new tax slabs are ongoing.Consider, India’s more than 5000 years old civilization, advance research and development capabilities, diversified skill set with the youngest population in the world, and extensive vendor base available, and a few Trillion US Dollar export turnover target is certainly achievable and within our reach. Meeting this landmark target, we would be able to strengthen the brand India image, can create a few million more jobs for our youth in the manufacturing and service sectors.We can bring proud to our nation India at par with the other top manufacturers, developed and exporting nations.Many initiatives are being taken by the various Government of India departments, such as MoF, RBI, MoC&I, DGFT, SEZ, STPI, EHTP and Trade associations such as FIEO, FICCI, CII, ITPO, PHDC&I & EPCES with their limited resources and guidelines available to them are doing their best to help exporters to turn all stones to achieve this mammoth target to realize export of a few Trillion US Dollar by 2025, which in return will help the country to boost its GDP, create employment for our young youths, reduce our Current Account Deficit and Finance Deficit for all times to come.We pray and hope for the best. Good Day will come for everyone and all of us will enjoy the same together as one nation and one Team.I will urge and request to our government to remove the fears from delayed investment on the widespread business uncertainty which is growing up in our country and which is extremely harmful to our youth and they have to face recession and then depression which is more harmful and will kill the soul of everyone.Regret for the error if any on my part.Kind Regards & with Best Wishes for ever in your noble life.

Indian Software IndustryThe Indian software industry has played a significant role in transforming India’s image from a slow moving bureaucratic economy to a land of innovative entrepreneurs and a global player in providing world class technology solutions and business services. The industry has helped India transform from a rural and agricultural based economy to a knowledge based economy (NASSCOM, 2011).The Indian software industry has been a remarkable success story. It has grown more than thirty percent annually for twenty years, with 2008 exports projected at close to USD sixty billion. From about USD fifty million in exports in the late 1980s, the industry crossed USD hundred billion in the year 2013, contributing significantly to the GDP of India. India exports to more than sixty countries, with two-thirds to the United States, including half of all Fortune 500 companies.The Indian software exports account for sixty five percent of the total software revenue. Over eighty percent of exports are software services, which includes custom software development, consultancy and professional services.According to NASSCOM, the IT sector went on grow at a CAGR of twenty five percent during financial year 2000-13, dominating the global IT-BPM market. The Indian IT industry has hit revenues of USD 108 billion in Financial Year 2013 with exports contributing USD 76 billion. Significantly, IT-BPM segment account for about eight percent of India’s GDP, while IT services remain dominant at fifty two percent. During the period 2007-13 bulk of the export revenue that is, sixty two percent came from the US, around twenty eight percent came from Europe. The Indian IT industry has crossed its revenues of USD 100 billion in the year 2013.The software sector can be divided into five major activities in declining order of complexity and skill requirements: (1) Project Management (2) Systems Analysis and Design (3) Software maintenance and support (4) Writing of Code and (5) Data Entry. The Indian software industry concentrated in the second and fourth activities and predominantly in fourth (Sen, 1995).Mr. N.R. Narayana Murthy, Chairman of Infosys Ltd., summed up the value proposition of the Indian software industry as “faster, better and cheaper”.According to Som Mittal, President of NASSCOM, currently over one lakh foreign nationals are working for Indian software companies’ around the world, a testimony of the industry’s growing popularity abroad. The industry totally employs around three million people. India’s IT workforce has gone global by setting up five hundred and eighty offshore development centres across seventy five countries and working in thirty five languages. The industry started more than two decades ago in English speaking countries, and got ninety percent of revenue then came from the US and the UK. This has changed over the years and revenue from both the countries is now down to seventy eight percent and the balance 22 percent comes from non-English speaking geographies.Historical OverviewThe Indian software industry started in 1970 with the entry of TCS into the domain of outsourced application migration work. According to Ramadorai, it began in early seventies with the main frame manufacturer, Burroughs asking its Indian sales agent, TCS to export programmers for installing system software for a US client.Beginning in the 1970s a growing shortage of engineers for the expanding computer industry in the US and Europe, an oversupply of Indian engineers relative to domestic demand, and a growing international reputation for the skills of Indian engineers, provided an opportunity, for body shopping in which Indian firms such as TCS sent Indian engineers overseas to do software programming onsite, mostly in US firms for limited, billable projects (Bhatnagar, 2001)In India the software industry developed initially in Mumbai, has been concentrated in six to seven cities such as Bangalore, Hyderabad, Chennai, Mumbai, Delhi and Pune. Policy makers within the country viewed the software industry as an engine of growth, a source of employment and foreign exchange, among other favorable effects (NASSCOM, 2012).The Indian software industry comprises of few big companies, with a large number of small and medium sized companies. Many new companies were established in 1980s by entrepreneurs with ambitions of creating world class software development centers. Firms which had started primarily as subcontractors for technical manpower gradually shifted to managing complete parts or phases of projects, and then to delivering complete solutions from India. NASSCOM played an aggressive role in promoting the Indian brand abroad. In some ways, during this period, India was building a launching pad for the eventful take off of its software industry.Structure of Software ExportsSoftware is the interface between computer and human commands. According to Schware (1992) “Software is a programme that translates the system of human logic into a set of electromagnetic impulses. In general, the term software refers both to the instruction that direct the operation of computer equipment and the information content, or data, that computers manipulate”. (Nath and Hazra, 2002).The widely acknowledged model of software development process is known as the Waterfall Model proposed by Royce in 1970 (Arora et al, 2001).Trade in software which is similar to service trade, is carried out mainly through a) Onsite Services, popularly known in industry circles as ‘body-shopping,’ are rendered the factors move to the site of the receiver, software manpower is exported to help solve the users software related problems. The development and execution of the software will be done on site. Under this mode of export, it has been argued that the net export earnings will be substantially less than the total export earnings. b) Offshore services, involves limited movement of both the factor and the receivers. The software is developed offshore according to the specified requirements and exported to the users. This method could be cost effective and calls for more investment in the form of hardware and communication network. c) Offshore Packages or Software Product Development, where neither the factor nor the receiver moves and is also highly capital and labor intensive and also requires substantial marketing costs, however the net export earnings will be higher compared to other modes (Joseph and Harilal, 2001).Growth of Indian Software IndustryAt an annual growth rate of fifty percent over the last decade that is, 1900-2000, the Indian software and service sector has expanded faster than in any other countries of the world. Strong fundamentals of a large talent pool, sustained cost competitiveness and an enabling business environment are some of the significant factors which have enabled Indian software industry to grow exponentially since its inception.The Indian software industry has grown at a phenomenal compounded annual growth rate of over fifty percent during the 1990s from modest revenue of USD 195 million in 1989-90 to evolve into a USD 8.3 billion industry by 2000-01. Furthermore, the industry has earned seventy five percent of revenue that is, USD 6.2 billion from exports (Kumar, 2001).The growth rate of the Indian software Industry has been substantially higher than the global software industry. Apparently India is the only country in the world to register a growth rate of around fifty percent in the software industry (Kumar, 2001).According to Raghavan and Nair, the Indian software and services sector has expanded faster than in any other countries of the world of comparable size. Such a wonderful and sustained growth rate has been unparalleled in any of the sectors of the Indian economy since independence (Illiyan, 2005).The contribution of IT sector to the GDP of the country has been significantly increasing from USD six billion in 1997-98 to USD sixty four billion in 2007-2008. Within ten years time the share of IT sector recorded a five-fold increase from about 1.2 percent in 1997-98 to 5.5 percent in 2007-08. The major share of this contribution is by software and related service exports. In 1998-99 the industry accounted for just one percent of India’s GNP. Its share nearly doubled by 2000-01 (NASSCOM, 2012)Factors Responsible for the Growth of Indian Software IndustryIndia has availability of a large number of English speaking professionals and has second largest manpower or talent pool available after US. It is believed that the key to the success of the Indian software exports is the supply of trained low cost of software professionals. The estimated wage costs in India were about one-third to one-fifth of the corresponding US levels for comparable work (Arora et al, 2001). With a young demographic profile, where over 3.5 million graduates and post graduates are added annually to the talent base, no other country offers a similar mix and scale of human resources (NASSCOM, 2009).During 1980s the government of India, recognizing the growth potential of the software industry, took key policy actions to open up the sector. A policy change in 1998 that effectively ended a monopoly on internet service provider (ISP) gateways, allowed India’s private sector to offer needed bandwidth to the growing industry. In 1990 the government created software technology parks in 30 locations across India to provide software companies access to high speed data communications and single window clearance for regulatory compliance. In 1998 a national telecom policy was announced to clarify the role of the regulator, transition from license fee to a revenue sharing model and open domestic long distance to private operators. In 2002 India liberalized international long distance to improve the communication system.NASSCOM was created in 1988 and in 1900 STPs were established to represent a fundamental approach to policy making for the software industry. The companies registered with STPs account for about sixty eight percent of software exporters.Demonstrated process quality and expertise in service delivery has been a key factor driving India’s sustained leadership in global service delivery. Since the inception of the industry in India, players have been focusing on quality initiatives to align themselves with international standards. Indian software industry has moved rapidly on the quality front. Indian software companies have adopted the ISO model as early as it was started. Indian companies have shifted to one of the important paradigms of quality, that is, Capability Maturity Model (CMM), enunciated by Software Engineering Institute (SEI).According to Computer Software Services Exports Statistical Year Book 2010-11, over seventy five percent of world wide SEI CMM level 5 certified companies are Indian. Over 300 Indian computer and software and services have already obtained ISO 9000 or CMM level 2 certification.Another most important reason for the success of Indian software industry is the international linkage established by Indian software companies. These linkages were both in the form of equity strategic alliance and non-equity strategic alliance. The non-resident Indians living in US has played an important role in fetching software projects and many non-resident Indians have established software firms in India.NASSCOM, the apex association of Indian software and services companies has played a significant role in establishing a brand image for India in the global software service markets by participating in global trade fairs and events and organizing learning events in India that feature prominent experts from major markets.India’s public investments in technical education beginning in the 1960s provided the foundation for growth of the IT industry. In the 1960s the government created a series of elite institutes for higher education in engineering and management, in collaboration with leading 296 universities in the US. One reason for concentration of software companies in the southern India is the proximity of the locations to a very large number of engineering colleges (Kumar, 2001).The phenomenal growth of Indian software exports can be attributed to the growing respect for Indian software industry in the international market. According to the estimate by NASSCOM (2000), Indian software companies earned around sixteen percent of their export revenue from Y2K related work in 1998-99 and twelve percent in 1999-2000. The Indian software industry earned an accumulative total of USD two and half billion from 1996-1999, from Y2K solutions. This is one of the significant factors for the growth of Indian software industry.During the initial phase Indian software exports were dominated by onsite development than offshore development. However, in the recent past, the dominance of offshore software development has been increasing. This shift has been possible because of establishment of STPs, which inter alia provided access to modern telecommunication facilities, and liberalized policies towards telecom sector which has led not only to the entry of private sector in telecom companies but also low telecom tariff and high speed data communication links to the industry.Besides the above facts, more liberal foreign investment policies, geographical time difference with the western world enabling round the clock development and proactive role by NASSCOM are other factors that gave fillip to the faster growth of India’s software exports.Government policy changed to a supportive stance with the election of a new prime minister, Mr. Rajiv Gandhi in 1984. The New Computer Policy (NCP) of 1984, which consisted of a package of reduced import tariffs on hardware and software. In 1985 all export revenue including software exports, were exempted from income tax. The NCP was designed to serve as a catalyst for the software industry and the establishment of Software Technology Parks (STPs).Until 1991-92 there was virtually no policy support for the software sector, since then the government has taken a number of positive steps. The government of India visualized the importance of electronics and information technology and its critical role in the economic growth of country, and as a result, established the Department of Electronics (DOE) in 1970 and the Electronics Commission in 1991. In 1999, to benefit the emerging digital economy, the central government has created a new Ministry of Information Technology by merging the DOE, National Informatics Centre (NIC) and Electronics and Software Export Promotion Council (ESEPC).Various policy announcements like the Import Policy (1983), Computer Policy (1984), Electronic Policy (1985), and Software Policy (1986) laid the foundations for the liberalized growth of IT industry in the country. Information Technology Act (2000) and Communication Convergence Bill (2001) of the Government clearly showed the direction in which the country is moving to facilitate a single communication network catering to all types of technologies such as Internet, Datacom, Telecom, Wireless, Wireline, Fixed, Mobile, Cellular, Satellite Communications and e-Commerce. National Task Force on Information Technology and Software Development (1998) of the Central Government has suggested a plan of action to make India, information technology super power in the world.The Data Security Council of India (DSCI) was launched in 2007 to institutionalize efforts to further enhance the information security environment in India. Supportive policy and active private enterprise have helped in creating an enabling business environment to facilitate the rapid growth of Indian IT-BPO (NASSCOM, 2008).The Information Technology Ministry has set up various autonomous organizations such as CDOT, C-DAC, CMC, STQC, CCA, NCST, ERNET, DOEACC, SCI etc., to address the requirements of different sectors of IT in a focused manner. These organizations are playing a major role in training and development of human power for electronics and computer industry. In 1992 the government extended the tax exemption on export profits available to merchandise exporters through section 80-HHC of the Income Tax Act to software exporters by introducing Section 80-HHE was on an annual basis. Section 10A and 10B of Income Tax Act, which provide income tax relief to EPZs and 100 percent EOUs were extended to software exports from such schemes in 1993.A mix of provider, industry and government initiatives are helping further strengthen India’s lead. India’s young demographic profile complemented by a vast and growing academic system continues to add to its pool of educated talent. In the financial year 2009, as a proportion of GDP the sector revenues were estimated to be around six percent. Software and service exports accounting for over ninety nine percent of the total exports, reached USD forty seven billion and directly employed over one million seventy lakh professionals (NASSCOM, 2009).Challenges of Indian Software IndustryThe most formidable challenge faced by Indian software industry is sustainability of high growth rate of software exports in future. Though software exports registered an annual average growth of more than fifty percent during 1900-2000, it has come down to around thirty percent since 2001. Furthermore, countries such as China, Russia, Philippines, Canada and Ireland have started emerging as competitors to India in the international market.In software industry, good communication infrastructure is considered vital for the continued growth and more particularly for offshore software development. Overall, the data communication infrastructure in India is expensive and in limited supply. Even though the country is known for its human resource for software industry world over, it has been struggling hard to meet the growing demand for skilled professionals.The imminent challenges for Indian software industry are volatility of Indian Rupee vis-à-vis US dollar, US economic slowdown since 2000 as sixty percent of our software exported to US and US immigration Bill, which proposes to cap the number of H1B and L1 visa holders employed on-site.Relationship between Indian Software Industry and US Software IndustryThe Indian software industry is largely complementary to US software industry. Indian software companies provide essential maintenance and development services, enabling US software companies to use their scarce in-house staff for higher value added work, such as design and develop new types of applications. The rise of Indian software industry has provided substantial benefits to US software companies, both users and developers of software. US software companies benefit because Indian software companies compete fiercely among themselves for contracts.India exports its software and services to more than 100 countries. Out of which US continues to be the most favored destination for Indian software exports as it is the world’s largest software market (Illiyan, 2005). It is a well known fact that export oriented software and service sector is indeed the driving force of Indian software industry and it is widely held as the engine of growth and earner of foreign exchange.The significance of the US market for Indian software exports is due to the fact that US is by far the world’s largest software market. The US information technology and financial services companies have moved much faster than their European counterparts to take advantage of offshore activities. The US had relatively more liberal immigration rules for work or residence than most other developed countries (Chakraborty and Jayachandran, 2001).Relationship between Indian Software Exports and INR-USD Exchange Rate VolatilityForeign exchange rate is a key factor in foreign trade. Recent changes in global economy such as recession and looming threat of deflation in the US and Europe has contributed to the weakening of the USD against major other currencies including the rupee. This has affected India’s export sector, especially information technology sector because sixty seven percent of their revenues come from US and about ninety percent of exports are invoiced in USD. Consequently operating margins of information technology companies have been hit hard. The volatility of the INR against USD has been one of the greatest concerns especially for information technology sector companies (NASSCOM).The Indian software industry started in 1984-85 with modest software exports crossed USD 100 billion in 2013. It has emerged as a major export earner for the country, contributing eight percent of total merchandise exports. India exports to more than 100 countries and over half of Fortune 500 companies outsource their software requirements from India.The growth in Indian software industry has been spurred mainly by the growth in export market demand. The export market is concentrated in the US and Europe. Almost two-thirds of the software revenue of Indian companies accrues from export sales in the US market. It is a known fact that export oriented software and services sector is indeed the driving force of Indian software industry and considered as the engine of growth and earner of foreign exchange.In 2008 software and service exports were around USD forty billons and directly employed nearly over two million professionals. While the US and UK remain the largest export markets accounting for about sixty one percent and eighteen percent respectively in the financial year 2007 (NASSCOM, 2008). As a proportion of national GDP, the sector revenues have grown from 1.2 percent in financial year 1998 to an estimated 5.8 percent in financial year 2009 (NASSCOM, 2009).During 2010-11, the share of computer and software services accounts for 4.33 percent in India’s GDP at current prices. Out of the total production around seventy seven percent was exported. India’s share in the world market during the year 2010-11 is estimated to be 7.8 percent as compared to 6.83 percent estimated in the year 2009-10.According to Computer Software and Services Exports Statistical Year book 2010-11, during the past five years, on an average India has been exporting software services to over 147 countries and US remains the top destination for India’s exports. During 2010-11 US accounted for a share of over fifty one percent of India’s total export of software services. In value terms, software exports to US were around USD 30 billion.The Indian software industry business model is export oriented, where the majority of the revenues comes from exports, exposes these businesses to risks involved with foreign trade such as exchange rate fluctuations. In the recent past, volatile INR-USD exchange rate has been one of the biggest challenges faced by Indian software industry.During the period 1975-1992, the exchange rate of the rupee was officially set by the RBI in terms of a (weighted) basket of currencies of India’s major trading partners and there were significant restrictions on not only capital but current account transactions as well (Bose, 2006). The movement towards market determined exchange rates in India began with the official devaluation of the rupee in July 1991. In March 1992, a dual exchange rate system was introduced in the form of the Liberalized Exchange Rate Management System (LERMS). In March 1993, India moved from the dual exchange rate regime to a single, market determined exchange rate system based on demand and supply in the foreign exchange market.The INR has been fluctuating a lot against dollar. The INR has declined by nearly twenty five percent from 54.28 on April 1st, 2013 to Rs. 68.85 on August 28th , 2013. On September 2, 2013 the rupee breached an all time low of INR 68.75, the biggest one day fall in last twenty years. This kind of change has a huge impact on business and it requires a strong strategy to handle such exchange risks. The fluctuating INR has also depreciated significantly against major currencies such as Euro, Yen and Pound. But the most impact on the software industry is from USD fluctuation only because nearly seventy percent exports from India are to the US.According to Som Mittal, President of NASSCOM, volatility is not good for business in the long run. It will be positive for the industry in the short-term making them more cost competitive. He also said that it is a real problem. We do not know where [at what rate] to hedge, our customers do not where to hedge. The gains from the falling rupee are not likely to be very significant as most IT companies hedge their foreign exchange position. The industry needs a stable currency as it helps in signing contracts.He also added that “volatile and uncertain” currency would create problems for the industry as it would make it difficult to evolve a strategy. Uncertainty was a matter of concern for the industry as a whole. In the industry’s perspective, a stable currency would enable it prepare for long-term contracts and hedging strategies. Though the depreciating currency could have short-term benefit for the IT industry, such considerations were narrow as majority contracts were being taken on the longer term for five years. The companies entering into longer term contracts hedge at the constant prices so that the contract could be covered for the period. We cannot depend on currency management for profits. We do not think our core competency is currency management. It is to get the business delivered and get the money.In 1947 that one rupee was indeed equal to one dollar. Ten grams of gold was above INR 88.62 in 1947, today it is about INR 29000. The rupee was 43.77 and 44.77 per US dollar in 2004 and 2010 respectively. The rupee was remarkably stable during 2004 and 2010. However, in the month of august of 2011, 2012 and 2013 it was 44, 55 and 68 respectively. The rupee became highly volatile after 2011 due to various uncertain factors prevailing in global financial markets.The INR exhibited two-way movements during 2006-07 moving in a range or INR 43.14-46.97 per USD. The rupee initially depreciated against the USD during the year, reaching INR 46.97 on July 19, 2006 reflecting higher crude oil price, FII outflows and geo-political risks in the Middle East region. The rupee, however, strengthened thereafter on the back of moderation in crude oil prices, revival of FII inflows and weakness of the USD in the international markets. The rupee appreciated further to reach INR 40.59 per USD on May 7th, 2007 due to increased supply of dollars in the market. Thereafter, however the rupee depreciated to INR 40.85 per USD on May 16th, 2007. At this level, the rupee appreciated by 6.7 percent over end March 2007 and 9.2 percent over end March 2006. Against the Euro, the rupee appreciated by 4.7 percent over end March 2007, but depreciated by 2.4 percent over end March 2006 (Rakesh Mohan, 2007).The INR has largely been volatile since January 2009, trading in a wide range between INR 46.75 and 52.18. Since 2011 the rupee has been depreciating and from an annual average value of 46.6 in 2011, the currency weakened to 53.4 in 2012 and in 2013, the average value has depreciated further to 56.34. While the downward spiral in rupee’s value which hit a historic low of INR 68.85 per USD in the month of august 2013, is expected to provide short-term benefits, it will affect signing of new contracts by domestic IT firms (NASSCOM).The appreciation or depreciation of the INR, as the case may be is more influenced by the weakness or strength of the USD.Foreign exchange risk is the change in the domestic currency value of assets and liabilities to the changes in the exchange rates. This may be positive or negative. Positive exposure gives rise to gain and negative exposures gives rise to loss. Foreign exchange risk is measured by the variance of the domestic currency value of asset or liability or an operating income, which can be related to unexpected changes in the exchange rates (Gandhi, 2006).According to Infosys Chairman Mr. N R Narayana Murthy, for every one percent movement in the INR against the USD has an impact of approximately fifty basis points on operating margins of a software company.Cointegration AnalysisIn this section, an attempt has been made to examine the relationship among Indian software exports, US economic activity, and INR-USD exchange rate volatility, using Engle-Granger twostage Cointegration method.To test the hypothesis that, “there exists no significant statistical relationship among Indian software exports, US economic activity, and INR-USD exchange rate volatility”, quarterly data for the period 2000-01 I st Quarter to 2012-13 IVth Quarter was collected and used for analysis.Data Notation TableS.No. Notation Variable Source Units of measurementlSWX Software Exports RBI USD Million.lEX Exchange Rate RBI INR/USD.lFEA US GDP BEA USD Billion.IVOL INR-USD Volatility14 - Absolute percentage change of INR-USDFrom the table it can be understood that the data pertaining to software exports and INRUSD nominal exchange rates, which is a proxy for price competitiveness between India and US were collected from the Reserve Bank of India (RBI) and US GDP values which are proxy for Economic Activity of US were collected from Bureau of Economic Analysis (BEA), US. Volatility14 was computed as an absolute percentage change of INR-USD quarterly exchange rates. All the series have been subjected to log transformation. The data has been denoted as lSWX for log of software exports, lEX for log of INR-USD exchange rates, lFEA for US Economic Activity, and lVOL for volatility of INR-USD exchange rate.