Introduction
The Indian Information Technology (IT) and Information Technology enabled Services (ITeS) sectors go hand-in-hand in every aspect. The industry has not only transformed India's image on the global platform, but also fuelled economic growth by energising higher education sector (especially in engineering and computer science). The industry has employed almost 10 million Indians and hence, has contributed a lot to social transformation in the country.
Furthermore, Indian firms, across all other sectors, largely depend on the IT & ITeS service providers to make their business processes efficient and streamlined. Indian manufacturing sector has the highest IT spending followed by automotive, chemicals and consumer products industries.
Industry body National Association of Software and Services Companies (Nasscom) predicts that the ITeS industry will bring in around US$ 225 billion by 2020, wherein 80 per cent of the growth would come from the presently untapped sectors and regions.
Market Size
The Indian IT & ITES industry has continued to perform its role as the most consistent growth driver for the economy. Service, software exports and business process outsourcing (BPO) remain the mainstay of the sector. Over the last five years, the IT & ITES industry has grown at a remarkable pace. A majority of the Fortune 500 and Global 2000 corporations are sourcing IT/ITES from India and it is the premier destination for the global sourcing of IT & ITES accounting for 55 per cent of the global market in offshore IT services and garnering 35 per cent of the ITES/BPO market.
India's IT and BPO sector exports are expected to grow by 12-14 per cent in FY14 to touch US$ 84 billion - US$ 87 billion, according to Nasscom.
Internet industry of India is expected to contribute US$ 100 billion to the country's gross domestic product (GDP) and generate about 22 million jobs by 2015, as per a report titled 'Online and Upcoming: The internet's Impact on India', released by McKinsey and Co.
IT spending in India is projected to reach US$ 71.5 billion in 2013, an increase of 7.7 per cent as compared to US$ 66.4 billion projected for 2012, as per a report by Gartner.
Investments
Indian IT's core competencies and strengths have placed it on the international canvas, attracting investments from major countries.
Between April 2000 and December 2012, the computer software and hardware sector attracted cumulative foreign direct investment (FDI) of Rs 52,377.08 crore (US$ 9.63 billion), according to the Department of Industrial Policy and Promotion (DIPP).
More recently, online retailing, cloud computing and e-commerce are the major driving forces behind the rapidly increasing growth in the IT industry. Online shopping has increased with the emergence of internet retailing and e-commerce.
Some of the major initiatives in Indian IT and ITeS sector:
- Tata Consultancy Services (TCS) has set up a new delivery centre in Liverpool, expanding its operations in the UK. The new facility will provide a secure applications development and maintenance centre for business applications
- Mumbai International Airport Ltd (MIAL) has entered into a 10 year contract with Wipro Infotech for the new integrated terminal T2. Under the contract, Wipro will provide managed services across the entire IT landscape at MIAL
- Mahindra Satyam has acquired 51 per cent stake in Complex IT, a SAP consulting provider in Brazil. This acquisition will focus on developing solutions for the enterprise solutions market within Brazil
- Mu Sigma plans to set up a development centre in the US. The company also plans to recruit another 1,000 personnel by December 2013, adding to its current headcount of 2,300 employees
- Wipro has partnered with New Zealand-based Pingar. With this partnership, Wipro has gained access to areas such as artificial intelligence and data mining
- HCL Technologies has entered into a multi-million dollar engineering services agreement with UK-based Cobham. HCL will support multiple Cobham sites across the globe with a range of services-hardware, software, embedded, mechanical and testing
Government Initiatives
As a part of the National Electronics Policy, the Government of India is planning to set-up 15 new laboratories under public-private-partnership (PPP) model for hardware and software testing. The labs, for which the locations are yet to be decided, will facilitate registration and testing of IT products before they are launched in the market.
Meanwhile, in order to boost investments in Indian Special Economic Zones (SEZs), the Government is likely to announce incentives for the IT-oriented export hubs. Among all the SEZs across various sectors, the IT-related ones contribute the most to the exports. Thus, the Ministry of Commerce plans to streamline the incentives to encourage such zones to establish their set-ups in tier-II and tier-III cities. The incentives would majorly aim at simplifying standards for setting up SEZs and not have any direct revenue implications.
FDI upto 100 per cent under the automatic route is allowed in Data processing, software development and computer consultancy services; Software supply services; Business and management consultancy services, Market Research Services, Technical testing & Analysis services.
Some of the major initiatives taken by the Government to promote IT and ITeS sector in India are:
- The Government of West Bengal plans to spend Rs 41 crore (US$ 7.54 million) to roll out citizen-centric services electronically across 19 districts including Kolkata
- Kerala has set an ambitious target of becoming a cent per cent digital state in governance, said Mr P K Kunhalikutty, Minister for Industries and Information Technology, Government of Kerala. The State has around 600 small, medium and large IT firms employing over 80,000 professionals directly and nearly three times the number indirectly
- The Cabinet has recently approved the National Policy on Information Technology 2012. The policy aims to increase revenues of IT and ITES industry from US$ 100 billion to US$ 300 billion by 2020 and expand exports from US$ 69 billion to US$ 200 billion by 2020
- The Government of India plans to set up 15 new laboratories for testing hardware and software products under public-private partnership (PPP) model
- The Ministry of Finance has issued a circular to chairmen of public sector banks and regional rural banks, that all payments to customers, staff, vendors and suppliers as well as disbursement of loans and payments towards investments should be made only through the electronic mode
Road Ahead
Indian corporate, across various industry segments, are installing and accepting IT products and services in a big way to improve their operations throughout the entire organisation. There are estimates that spends over IT services, across the industry segments, will witness quantum jump in the years to come. For instance, IT spending by the Indian BFSI sector is expected to reach US$ 3.5 billion by 2014, according to advisory firm Zinnov.
Similarly, IDC Manufacturing Insight predicts that IT spend by Indian manufacturers would grow at an average rate of 14.5 per cent between 2012 and 2016 to reach US$ 8.78 billion, which would be the double of manufacturing IT expenditure inculcated in 2011.
Hence, it can be fairly concluded that India Inc is increasingly updating and automating its business processes by embracing modern IT products and services with open arms.
Exchange Rate Used: INR 1 = US$ 0.0183 as on February 28, 2012
References: Media Reports, Press Releases, Department of Industrial Policy and Promotion (DIPP) statistics, Department of Information and Technology
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