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August, 2011

IT & ITeS in India - Brief Introduction

Indian information technology (IT) and IT enabled Services (ITeS) sectors have seen stupendous growth during the last decade. The IT industry, as a whole, has placed India on the world map as a major knowledge-based economy and outsourcing hub. Business Process Outsourcing (BPO) segment, which is an industry in itself, has played a vital part in fuelling economic growth. The industry not only influences people’s lives through an active direct and indirect contribution to the various socio-economic parameters such as employment, standard of living and diversity, but also has played a significant role in transforming India’s image to a land of innovative entrepreneurs and a global player in providing world class technology solutions and business services.

Nearly one million jobs were created in India during 2010-11, of which 70 per cent were from the IT and BPO sectors, according to data released by the Ministry of Labour and Employment. Various industry experts believe that the workforce in Indian IT industry will reach 30 million by 2020 and this sunrise industry is expected to continue its mammoth growth.

The sector is estimated to have grown by 19 per cent in the FY2011, aggregating revenue of almost US$ 76 billion. India’s outsourcing industry has witnessed a rebound and registered better than expected growth according to National Association of Software and Service Companies (NASSCOM).

The export revenues are estimated to have aggregated to US$ 59 billion in FY2011 and contributed 26 per cent in total Indian exports (merchandise plus services), according to a research report ‘IT-BPO Sector in India: Strategic Review 2011’, published by NASSCOM.

Within exports, ITeS segment (contributed 57 per cent of total IT exports), grew by 22.7 per cent for FY11, while BPO export segment grew by 14 per cent.

Driven by increasing use of electronics, technology alignment and demand for localised products, engineering design and products development segments generated revenues of US$ 11.3 billion in FY2011, growing by 13.4 per cent.

The domestic IT-BPO market marked an improvement of 16 per cent to aggregate revenues of US$ 17.6 billion. Massive expansion in technology adoption across government and private sectors has driven customer services and internal controls to get efficient which has led to an increase in outsourcing within domestic market also.

Market Dynamics

Top 200 Indian IT companies have garnered combined revenues of US$ 84 billion, achieving an average growth rate of 25 per cent in 2010-11, the highest since 2007, according to an annual research by Cybermedia’s Dataquest magazine. According to the survey, the top 5 Indian IT companies in FY11 were Tata Consultancy Services (TCS), Infosys, Wipro, Hewlett Packard (HP) and Cognizant with revenues of US$ 7.4 billion (25 per cent growth over 2009-10), US$ 5.8 billion (22 per cent), US$ 5.6 billion (13 per cent), US$ 5.2 billion (30 per cent) and US$ 4.8 billion (37 per cent), respectively.

IT & ITeS - Key Developments and Investments

Between April 2000 and April 2011, the computer software and hardware sector received cumulative foreign direct investment (FDI) of US$ 10,821 million, according to the Department of Industrial Policy and Promotion (DIPP).

  • Latin American nations, in a bid to have closer ties with India, have indicated development of bilateral trade pacts and free trade agreements, wherein there is a growing interest for co-operation in IT.
  • Tech giant IBM and telecom service provider Bharti Airtel have signed a 10-year deal wherein former will provide IT solutions to the latter’s employees in 16 African countries.