The National Policy on Software Products (NPSP) 2019

Last Updated at: Nov 10, 2020
The National Policy on Software Products 2019 (NPSP)
The Government of India in its official release in March 2019 has formulated the National Software Policy, with an outlay of Rs.1500 Crore to implement the programs envisaged under this policy over the period of 7 years.


The Government has approved the NPSP-2019 to create a robust software product ecosystem, which aims to develop India as the global software product hub.


We are all witnesses to the grand success some of India’s technology startups, notably, Zomato, Lenskart, Swiggy, PayTM, BigBasket, PolicyBazaar, which have also attained the coveted “unicorn status” of being a billion-dollar business. While most of these startups appeal to the mass consumer-segment, they have undeniably demonstrated the larger growth potential India has, in terms of providing a strong business environment when it comes to technology-oriented startups.

National Policy on Software ProductsSince tech startups cannot function without a strong software base, it is important to discuss legislative and economic perspectives on promoting the development of software in India. In this post, we highlight nuances of the National Software Policy of 2019 framed by the government for promoting start-ups and also highlight some challenges faced by technology startups in India.

The National Software Policy, 2019

The software sector is characterised by a continuous wave of upgradation, monopolisation through intellectual property rights, mainly patents of new technology and has played a key role in boosting revenues through its contribution in India’s service exports. Armed with a large demographic dividend of a strong and capable workforce that is technologically savvy, India is uniquely positioned to leverage strategic gains from its software business development.

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Funds and Divisions 

The Government of India in its official release in March has formulated the National Software Policy, with an outlay of ₹1500 Crore to implement the programmes envisaged under this policy over the period of 7 years. The corpus under the scheme of ₹1500 Crore is divided into Software Product Development Fund (SPDF) and Research & Innovation fund. With these two divisions, the government plans to achieve the following objectives:

What the policy aims to achieve 

The National Software Policy has the following five Missions:

  • Promote the creation of a sustainable Indian software product industry, driven by intellectual property (IP), leading to a ten-fold increase in India share of the Global Software product market by 2025.
  • Nurture 10,000 technology startups in the software product industry, including 1000 such technology startups in Tier-II and Tier-III towns & cities and generating direct and indirect employment for 3.5 million people by 2025.
  • Creating a talent pool for software product industry through (i) up-skilling of 1,000,000 IT professionals, (ii) motivating 100,000 school and college students and (iii) generating 10,000 specialized professionals that can provide leadership.
  • Building a cluster-based innovation driven ecosystem by developing 20 sectoral and strategically located software product development clusters having integrated ICT infrastructure, marketing, incubation, R&D/testbeds and mentoring support.
  • Evolving and monitoring scheme & programmes for the implementation of this policy, the National Software Products Mission will be set up with participation from Government, Academia and Industry.

Potential Challenges to the development of the software industry

Infrastructure costs – The tech business needs a very substantial investment in computing assets, regular power supply, secure back-end support and a highly trained workforce, all translating in huge economic outflows in very early-stage companies as well. Given the risk involved due to fast-changing technologies which have the potential to render a product or a service obsolete by the time it becomes saleable, investors may become wary of tech startups.

The threat of disruption due to global Trade Wars – While USA and China, both being countries with strong technology underpinnings in business, the current economic scenario with USA and India facing a catch-22 situation with disputes on custom duties, sanction, defence equipment etc, have shifted trade possibilities towards countries like Vietnam. The partial convertibility of rupee and its volatile nature in the recent few months has also raised concerns, impacting almost all startups dealing in exports.

Lack of clarity on data protection rules – While European Union has spearheaded the global mission on the protection of data, with several countries like Japan the following suit, India has largely remained out of the realm of such negotiations due to its strong assertion on the localization of data within the Indian territory. However, without a data protection law in place, there is ambiguity on norms of enforcement, storage and sharing of private data, which forms one of the crucial assets of any tech start-up.

With this policy adding to the overtones of Make in India, Startup India and several other policy motives like tax exemption, the government envisages a technology startup ecosystem driven by commercialisation, innovation and sustainable intellectual property rights that would contribute an additional USD 70-80 billion by way of exports in the Software products industry and generate employment of more than 3.5 million people by the year 2025

Avani Mishra is a graduate in law from the National Law Institute University, Bhopal. She qualified the Company Secretary course with an All India Rank 1 and is a recipient of the President’s Gold Medal for her academic distinctions. She also holds a B.Com degree with a specialization in Corporate Affairs and Administration.