BRICS Industrial Intelligence

Executive Summary

The National Policy on Software Products, 2019, issued by India's Ministry of Electronics and Information Technology (MeitY) on February 28, 2019, is a strategic national framework designed to transform India from an IT services outsourcing hub into a global software product powerhouse. Recognizing that India's IT sector -- despite generating approximately $167 billion in revenues in FY2017-18 -- derived only about $7.1 billion from software products (a fraction of the approximately $400 billion global market), the policy sets an ambitious vision: a 10x revenue increase in the software products industry by 2025, nurturing 10,000 technology startups (including 1,000 in Tier II and III towns), and creating a talent pool of 3.5 million professionals. The policy is structured around five mission areas covering ecosystem creation, entrepreneurship, talent development, intellectual property, and domestic and global market access, with the National Software Products Mission (NSPM) serving as the implementing body.

Key Provisions

Software Product Development Fund (SPDF). The policy establishes a dedicated fund with a corpus of Rs. 1,000 crore (approximately $120 million) to finance the software products ecosystem. The SPDF is designed to provide seed funding, early-stage and growth-stage capital to Indian software product companies; support R&D, innovation, and patent creation; fund software product incubators and accelerators; and assist companies with marketing, brand building, and participation in international trade events.

Five Mission Framework. The policy is organized around five interconnected missions:

Mission 1 focuses on creating a world-class software product ecosystem through business-friendly policies, IP protection, procurement preferences, and incentive mechanisms.
Mission 2 targets entrepreneurship and innovation, specifically supporting startups, MSMEs, and individual entrepreneurs, with particular emphasis on Tier II and III cities.
Mission 3 addresses the talent gap through specialized curricula, reskilling programs, research promotion in AI, ML, IoT, blockchain, cloud computing, cybersecurity, and AR/VR.
Mission 4 seeks to evolve India's intellectual property regime to meet global software industry requirements, including fast-tracking software patents.
Mission 5 focuses on strengthening domestic market access through preferential government procurement and building capacity for global market penetration.

Definitional Framework. The policy carefully defines key terms: an "Indian Software Product Company" (ISPC) must be an Indian company (under Section 2(20) of the Companies Act 2013 with >50% Indian shareholding) deriving 50% or more of revenue from software products. "Software products" are broadly defined to include embedded software, system software, application software (including SaaS), software as a medical device, tools, and platforms, with key characteristics of portability, replicability, and scalability.

Preferential Procurement. The policy commits to exploring preferential procurement of Indian software products by government agencies and government-funded entities, including the creation of a dedicated portal for listing and discovering Indian software products.

Quality Standards and Certification. Development of standards and certification frameworks for Indian software products is prioritized to ensure quality and security, with an aim toward global recognition of Indian software certifications.

IP Regime Reform. The policy explicitly calls for strengthening IP protection mechanisms, streamlining the patent filing process, fast-tracking software patents, and building awareness of IP protection among software product companies.

Goals and Timelines

The policy sets a 2025 target horizon for its key objectives:

Revenue: Achieve a 10x increase in software product industry revenue.
Startups: Nurture 10,000 technology startups in the software product industry, with 1,000 in Tier II and III towns.
Talent: Create a talent pool of 3.5 million professionals for the software product industry through upskilling and new-age skill development.
Global Position: Develop India as a "Global Software Product Hub."

These goals are deliberately ambitious, intended to catalyze a structural shift from services-dominated to product-oriented IT industry composition.

Implementation Mechanisms

National Software Products Mission (NSPM). The policy's primary implementation vehicle is the NSPM, to be established under MeitY. The NSPM comprises representatives from relevant ministries, industry associations (NASSCOM, IESA, manufacturers' associations), and leading academic institutions. Its responsibilities include formulating action plans, setting up the SPDF, monitoring progress, coordinating with stakeholders, and conducting periodic reviews.

State Government Coordination. State governments are explicitly encouraged to formulate complementary policies and provide additional support for software product ecosystems within their jurisdictions, creating a federal approach to implementation.

Convergence with Existing Schemes. The policy mandates implementation through convergence with existing government programs and schemes, avoiding duplication and leveraging established institutional infrastructure.

Centres of Excellence and Incubators. The policy supports establishing software product-specific Centres of Excellence, incubators, and accelerators across the country, with deliberate geographic distribution to Tier II and III towns.

Industry-Academia Collaboration. Educational institutions are directed to develop specialized software product development curricula in partnership with industry. Research in emerging technologies is to be promoted through centres of excellence and academic partnerships.

Industry Impact

The National Policy on Software Products represents a significant strategic pivot for India's IT sector. For decades, the Indian IT industry's growth model was predicated on labour arbitrage and service delivery for foreign clients. This policy acknowledges that model's limitations and charts a course toward higher value-addition through product development and IP creation.

Startup Ecosystem. The policy provides a government-backed mandate for nurturing software product startups, complementing existing programs like Startup India. The emphasis on Tier II and III cities is particularly significant, aiming to decentralize innovation beyond the traditional IT hubs of Bengaluru, Hyderabad, Pune, and the NCR region.

Enterprise Software. Indian enterprise software companies stand to benefit from preferential government procurement policies, which could provide the domestic revenue base needed to scale before pursuing international markets. The dedicated software product portal concept, if effectively implemented, could serve as a discovery and matchmaking platform.

SaaS Industry. India's rapidly growing SaaS sector -- home to companies like Freshworks, Zoho, and Postman -- aligns closely with the policy's objectives. The SPDF funding mechanism and IP regime reforms could accelerate the growth of mid-stage SaaS companies seeking to compete globally.

Talent Pipeline. The commitment to a 3.5 million professional talent pool addresses one of the most critical bottlenecks for software product companies: access to engineers, designers, and product managers with product-oriented (rather than services-oriented) skillsets.

However, the policy has faced criticism for its implementation pace. The NSPM was slow to become operational, and the SPDF deployment was delayed. Critics have noted that while the vision is commendable, the gap between policy articulation and on-the-ground execution remains a challenge. The 2025 targets, particularly the 10x revenue increase, require sustained effort, substantial capital deployment, and regulatory simplification that has proven difficult to achieve within the original timeline.

Amendment History

The National Policy on Software Products was approved by the Union Cabinet on February 28, 2019. It represented the first standalone national policy specifically targeting the software products sub-sector, distinct from broader IT policies and digital economy initiatives. The policy emerged from extensive industry consultations and deliberations involving MeitY, NASSCOM, and other stakeholders. While no formal amendments have been issued to the policy text itself, the implementation framework has evolved through the establishment of the National Software Products Mission and the allocation of funds under the SPDF. The policy remains in force and continues to guide MeitY's approach to software product industry development, complemented by subsequent initiatives such as the IndiaAI Mission (2024), which addresses the AI-specific dimension of software product development.