Performance Evaluation of India’s Software Industry Using Data Envelopment Analysis: A Long-Term Firm-Level Study

Abstract

The software industry in India has emerged as a major driver of economic growth, export expansion, and structural transformation within the service sector. In this context, assessing firm-level efficiency is essential for understanding the sector’s contribution to economic development. This study empirically examines the technical efficiency of selected Indian software companies over the period 1992–2023 using an input-oriented Data Envelopment Analysis (DEA) model under variable returns to scale (VRS). Firm-level panel data are utilized, with total liabilities and fixed assets as inputs and net sales and profit after tax as outputs. The findings reveal substantial heterogeneity in efficiency performance across firms over time. While leading firms operate close to the efficiency frontier, several firms exhibit persistent inefficiencies, indicating significant scope for improved resource utilization and scale optimization. The results highlight the importance of managerial capability, financial structure, and efficient capital allocation in sustaining the long-term contribution of the software sector to India’s economic development.