In the last two decades, export growth has been a major determinant of India’s economic growth.
There is also a close correlation between the performance of the export sector and global economic policy.
Governments, squeezed by the recession, are likely to look at enforcing laws that protect their national workforce. Prevention of ‘unfair competition’ is likely to become a global movement, spelling opportunity for others — and creating issues for nations that do not adapt to these reforms.
In this context, the US law against ‘unfair competition’ demands closer examination. On the face of it, the law prevents companies that use stolen IT (hardware and software) in their supply chain, from selling goods within the US. The larger aim of this regulation is to provide a level playing field to all businesses.
This means that all companies in India or elsewhere in the world, big or small, that export fully manufactured goods or parts of it for sale in the US, are now at risk of their business being disrupted by investigations into their software assets.
Ignorance no defence
The usual reasons given to justify ‘stolen IT’ are: legal software is expensive compared with pirated versions; the users simply did not know they were using stolen IT.
Let’s take the first argument.
Indian business units are typically compliant when it comes to direct or indirect taxes, electricity bills and other such processes and costs. The apprehension with software compliance really lies in the fact that it is perceived as a steep cost!
However, if evaluated, the cost of IT in any organisation is actually minuscule as compared with the overall cost of running the business. In a scenario where the cost of IT is a minor percentage of the total cost whereas the risk of losing out on future business due to non-compliance is 100 per cent, the choice is obvious.
Coming to the second argument, not being aware of using “stolen IT” is a plausible, but not a legally acceptable argument. It is illegal in India to use stolen IT under the existing laws. Violation of Copyright and Trademark Act invites civil penalties and criminal punishment. Lack of knowledge of the law is no defence for crime.
The economic reasons for complying are compelling enough. For an individual business, non-compliance is a matter of survival. As a nation, the US market is one we cannot afford to ignore. In 2011, India was the US’ 13th largest supplier of goods — totalling $36.2 billion, up 22.5 per cent from 2010. Certainly not an export revenue to be scoffed at.
Opportunity for India
India has been facing stiff competition in export to the US from China, Vietnam, Japan, Pakistan, Cambodia and Turkey, given the various trade agreements between the US and competing suppliers.
Considering the fact that the software piracy rates in most of these regions is quite high, there is a clear opportunity for Indian manufacturers to command a higher export pie simply by using genuine IT.
Taking the example of India’s textiles and clothing exports, India has a share of around 4 per cent of world exports, a market dominated by neighbouring China.
China is one of the fastest growing technology markets in the world, but it also faces extensive software piracy. China’s illegal software market was worth nearly $9 billion in 2011 versus a legal market of less than $3 billion, making its piracy rate 77 per cent (as per a study by Business Software Alliance).
With the US law on unfair competition taking effect in countries across the world, there is a compelling opportunity for India.
We can greatly improve our share of the global textile explore market by competing smartly and abiding by the laws. A disruption in the form of lack of compliance will clearly damage our chances.
The levels of piracy in India are lower than those of competing markets; this again works well for India. For example, piracy is a deep-rooted problem in Bangladesh, with almost 90 per cent of software being pirated (as per a study by BSA). The country ranks first in the Asia-Pacific region and second highest in the world for use of illegal IT.
With this enforcement, the country is likely to lose out on its existing market, if it does not start compliance at every level and with immediate effect.
If we were to comply rapidly, it would give us the opportunity to gain a larger market share from defaulting nations and attain a prominent position before they take remedial action, which they are bound to, and stabilise their position.
The recent lawsuit by a US lawmaker against an Indian company, Pratibha Textile, for allegedly using ‘stolen IT’ is a clear call for compliance. For countless manufacturers in India, risking loss of trade with the US is simply not an option. Other nations have taken notice and have started to work towards trimming piracy levels and building a compliant business set-up.
It is time India pays heed to this trend, enhancing its global reputation as a nation that promotes ethical business practices.
This is the writing on the wall — do (comply) or die.
(The author is Executive Director, American Chamber of Commerce in India.)