IT & ITeS Industry in India

Introduction     

The global sourcing market in India continues to grow at a higher pace compared to the IT-BPM industry. India is the leading sourcing destination across the world, accounting for approximately 55 per cent market share of the US$ 185-190 billion global services sourcing business in 2017-18. Indian IT & ITeS companies have set up over 1,000 global delivery centres in about 80 countries across the world.

India has become the digital capabilities hub of the world with around 75 per cent of global digital talent present in the country.

Market Size

The IT-BPM sector in India stood at US$177 billion in 2019 witnessing a growth of 6.1 per cent year-on-year and is estimated that the size of the industry will grow to US$ 350 billion by 2025. India’s IT & ITeS industry grew to US$ 181 billion in 2018-19. Exports from the industry increased to US$ 137 billion in FY19 while domestic revenues (including hardware) advanced to US$ 44 billion. IT industry employees 4.1 million people as of FY19.

Spending on information technology in India is expected to reach US$ 90 billion in 2019.

Revenue from digital segment is expected to comprise 38 per cent of the forecasted US$ 350 billion industry revenue by 2025.

Investments/ Developments

Indian IT's core competencies and strengths have attracted significant investments from major countries. The computer software and hardware sector in India attracted cumulative Foreign Direct Investment (FDI) inflows worth US$ 43.58 billion between April 2000 and December 2019 and ranks second in inflow of FDI, as per data released by the Department for Promotion of Industry and Internal Trade (DPIIT).

Leading Indian IT firms like Infosys, Wipro, TCS and Tech Mahindra, are diversifying their offerings and showcasing leading ideas in blockchain, artificial intelligence to clients using innovation hubs, research and development centres, in order to create differentiated offerings.

Some of the major developments in the Indian IT and ITeS sector are as follows:

• In January 2020, Nippon Telegraph and Telephone, a Japanese tech announced its plans to invest a significant part of its US$ 7 billion global commitment for data centres business in India over the next four years.
• In February 2020, Tata Consultancy Services has bagged a contract worth Rs 10,650 crore (US$ 1.5 billion) from pharma company Walgreens Boots Alliance.
• Total export revenue of the industry is expected to grow 8.3 per cent year-on-year to US$ 136 billion in FY19.
• UK-based tech consultancy firm, Contino, has been acquired by Cognizant.
• In May 2019, Infosys acquired 75 per cent stake in ABN AMRO Bank's subsidiary Stater for US$ 143.08 million
• In June 2019, Mindtree was acquired by L&T.
• Nasscom has launched an online platform which is aimed at up-skilling over 2 million technology professionals and skilling another 2 million potential employees and students.
• Revenue growth in the BFSI vertical stood at 6.80 per cent y-o-y between July-September 2018.
• As of November 2019, there were 417 approved SEZs across the country where 274 are of IT & ITeS and143 are exporting SEZs.
• PE investments in the sector stood at US$ 3.6 billion in Q3 2019.

Government Initiatives

Some of the major initiatives taken by the government to promote IT and ITeS sector in India are as follows:

• On May 2019, the Ministry of Electronics and Information Technology (MeitY) launched the MeitY Startup Hub (MSH) portal.
• In February 2019, the Government of India released the National Policy on Software Products 2019 to develop India as a software product nation
• The government has identified Information Technology as one of 12 champion service sectors for which an action plan is being developed. Also, the government has set up a Rs 5,000 crore (US$ 745.82 million) fund for realising the potential of these champion service sectors.
• As a part of Union Budget 2018-19, NITI Aayog is going to set up a national level programme that will enable efforts in AI^ and will help in leveraging AI^ technology for development works in the country.
• In the Interim Budget 2019-20, the Government of India announced plans to launch a national programme on AI* and setting up of a National AI* portal.
• National Policy on Software Products-2019 was passed by the Union Cabinet to develop India as a software product nation.

Achievements

Following are the achievements of the government during 2017-18:

• About 200 Indian IT firms are present in around 80 countries.
• IT exports from India are expected to reach highest ever mark of US$ 137 billion of revenues in FY19 growing at 8.3 per cent.
• Revenue of GICs is expected to touch US$ 50 billion by 2025.
• Highest ever revenue was generated by Indian IT firms at US$ 181 billion in 2018-19.

Road Ahead

India is the topmost offshoring destination for IT companies across the world. Having proven its capabilities in delivering both on-shore and off-shore services to global clients, emerging technologies now offer an entire new gamut of opportunities for top IT firms in India. Export revenue of the industry is expected to grow 7-9 per cent year-on-year to US$ 135-137 billion in FY19. The industry is expected to grow to US$ 350 billion by 2025 and BPM is expected to account for US$ 50-55 billion out of the total revenue.

Note: Conversion rate used as on January 2020, Re 1 = US$ 0.01402

References: Media Reports, Press Information Bureau (PIB), Department for Promotion of Industry and Internal Trade (DPIIT), Department of Information and Technology, Union Budget 2020-21

Notes: * - As per Gartner, ^ - Artificial Intelligence

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.