The move to a single European currency is proving a boon in India, 3,800 miles away from the European Central Bank. The country's blossoming software industry expects to reap at least $2 billion (£1.4 billion) in contracts from banks and companies adjusting their systems to the unified currency by 2002.

By 2000, India's software sector could be earning a third of its expected $6 billion in software export earnings through offering euro conversion services and packages, according to estimates from the National Association of Software and Service Companies (Nasscom), the industry lobby.

Moreover, the industry, now enjoying an eighth successive year of export growth exceeding 50 per cent, sees the euro as offering another step up the value added chain for an industry founded on offering low-cost, labour-intensive software services. Initially, this was done by physically flying out skilled, but cheap, Indian software engineers to service clients abroad, mostly to companies in the US.

"Europe has been slow to wake up to Indian software," says Dewang Mehta, Nasscom's executive director. "But, thanks in part to the euro, it's now waking up very fast."

Indian software sales to Europe were just 5 per cent of total exports in 1994, but the proportion, driven by euro-related business, hit 23 per cent for the first half of this fiscal year - part of an overall 65.6 per cent rise in software sales in rupee terms for the period.

The shift is part of a transformation of India's software sector as, led by a host of ambitious and increasingly global companies such as Infosys Technologies, Satyam Computer Services and Tata Consultancy Services. They are chased by a plethora of smaller wannabes as the industry shifts from offering clients on-site services, to Indian-based "offshore" service - and seeks eventually to shift away from offering services and towards Indian-branded software products and packages.

Software services - where Indian companies offer tailored software problem solving to specific corporate clients - still account for 90 per cent of export earnings. But the trend towards Indian companies offering their services remotely, usually linked by leased 64kbs high-speed data links to clients in the US and elsewhere, is marked. While in 1991, 95 per cent of Indian software earnings came from flying engineers to foreign clients, the proportion this year is down to 61 per cent and expected to fall to 55 per cent within three years.

The Indian government's recent decision to end the state monopoly on providing Internet access should accelerate the trend, making it easier for small software houses to serve overseas clients from Hyderabad, Bangalore, Pune or Madras, without having to pay 800,000 rupees (£13,565) for each point-to-point high-speed data link.

"Smaller companies will benefit most from the Internet policy," says L. Subramanyam, editor of Dataquest, the industry magazine. "The 50-100 person units, the little software shops: they won't need leased lines or to make the rounds of the bureaucracy to get them, or pay the high rentals."

The rising euro-related business will also wean India's software companies away from their reliance on the US, where they now do 58 per cent of their overseas business.

Industry executives also believe it will help the bigger software companies move up the value-added chain, away from simply offering low cost problem solving - such as solutions to the year 2000 problem.

About a fifth of the 40,000 Indian software engineers servicing foreign clients are employed on year 2000 solutions. This work accounted for 23 per cent of the 50 billion rupees (£800 million) in export earnings for the six months to September. "It's labour intensive, often tedious and dull work," says Mr Mehta. "But it pays." India has already won year 2000 business worth $1.5 billion, according to Nasscom. It expects the final tally to be $2.5 billion.

Refashioning European bank treasuries' systems, or those of big manufacturing companies, is still predominantly service-oriented work, but of more sophistication, and offering work beyond the millennium. "The euro business offers a much wider software challenge, and over a number of years," says Mr Mehta.

"You have at first the 11 countries joining immediately, their transition period, then new countries joining - while also finding opportunities for companies in, say, the UK which also need system changes." Tata Consultancy Services, India's biggest software company, for example, recently won a contract from the Bank of Scotland to make its systems euro-friendly.

"The European market will develop very quickly," says Mr B. Ramalingaraju, chief executive officer of Satyam Computer Services, who says his Hyderabad-based company is about to launch a marketing campaign in Europe - offering in the process, and rather nimbly, a package designed to address both the euro and year 2000 at one stroke.