Indian IT companies, eager to become global players, have no patience for the exchange control rules they face. But Indian officials and regulators are stuck in an era where capital was scarce and controls were needed to fence it in. It is a clash of two mindsets.
Since economic reforms began in the early 1990s, controls on inward investments were eased. But those on outward investments remain tight. The IT companies and investors have been working to change this in recent months. The oYcials, still cautious, are now more open to change.
Software companies that plan to list on Nasdaq, partly to acquire currency to buy companies abroad, were stumped because Indian rules restricted them to companies worth just $100 million, and required clearance by the regulators. After intense lobbying that rule was eased in March; they can now buy companies worth up to 10 times their export earnings.
Ashank Desai, CEO of Mastek, a Mumbai-based software services company, says: "I don't see why the government should put any restrictions on how we spend the money as long as we raise the cash abroad. There is no forex outflow from India."