BE IT Industry

8/6/2019 BE IT Industry

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Indian IT industry: On a steady growth track

The total revenues for the Indian IT industry were estimated to touch US$71.7 billion in 2008-09.

The Indian IT industry has been growing at a compound annual growth

rate (CAGR) of 27 per cent for the last five years. Contribution of IT industry to Indias gross domestic product (GDP) has

grown from 1.2 per cent in 1997-08 to an estimated 5.8 per cent in 2008-09.

During this period 2008-2008, direct and indirect employment wasexpected to reach 2.23 million and eight million, respectively.

Domestic market revenues were expected to touch US$ 24.3 billion in2008-09.

Domestic market revenues have been growing at a CAGR of 24 per cent forthe last five years.

MARKET OVERVIEWMARKET OVERVIEW

Source:"The IT-BPO Sector in India -Strategic Review 2009: Executive summary",NASSCOM website, www.nasscom.org, accessed 20 September 2009


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MARKET OVERVIEW (CONT)MARKET OVERVIEW (CONT)

Source:"The IT-BPO Sector in India -Strategic Review 2009: Executivesummary", NASSCOM website, www.nasscom.org, accessed 20 September 2009

India's IT industry (USD bn)Particulars FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

IT Services 10.4 13.5 17.8 23.5 31

- Exports 7.3 10 13.13 18 23.1

- Domestic 3.1 3.5 4.5 5.5 7.9

ITES-BPO 3.4 5.2 7.2 9.5 12.5- Exports 3.1 4.6 6.3 8.4 10.9

- Domestic 0.3 0.6 0.9 1.1 1.6

Engineering services, R&D

and Software products 2.9 3.9 5.3 6.5 8.6

- Exports 2.5 3.1 4 4.9 6.4

- Domestic 0.4 0.7 1.3 1.6 2.4

Hardware 5 5.9 7 8.5 12

- Exports 0.5 0.5 0.6 0.5 0.5

- Domestic 4.4 5.1 6.5 8 11.5

Total IT industry (including

hardware) 21.6 28.4 37.4 48 64


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More than 80% of revenues come from Exports and only 20% from

domestic business


Source:"The IT-BPO Sector in India -Strategic Review 2009: Executive

summary", NASSCOM website, www.nasscom.org, accessed 20 September 2009

Revenues from domestic and export (in USD billion)


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Sources: IT: Industry profile, July 2009, CRIS INFAC

ITeS: Industry profile, April 2009, CRIS INFACNote: E estimates

Revenues by segment Indian IT industry

21.7

28.1

37.4

48.0

71.7


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49%

34%

8%

9%

Domestic revenue segmentation of 2008-09

(US$ bn)IT services

ITeS-BPO

Software products

and engineeringservices

Hardware

0

10

20

30

40

50

IT revenue in 2008-09

(US$ bn)


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IT services: Anchor segment of the sector


Source: IT: Industry profile, July 2009, CRIS INFAC

41%

20%

17%

8%2%

3%9%

Source ofRevenue by

Verticals, 2008-09

BFSI Hi-tech/Telecom

Manufacturing Retail

Media Publishing

Entertainment

The Indian IT services market grew by 23 per

cent between 2005-06 and 2008-09 and the

revenues are estimated at nearly US$ 8.3 billion

in 2008-09.

The banking, financial services and insurance

(BFSI) vertical continues to account for the

largest share of IT/ITeS services at 41 per cent.

Hi-Tech/ telecom vertical accounts for the

second-largest share of the pie at 20 per cent.

Other verticals such as manufacturing, retail,

media and healthcare are rapidly gaining pace.


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IT industry contributes to around 5.2% to Indian USD 1 trillion GDP.


3.64.1

4.75.2 5.2

0

1

2

3

4

5

6

2004 2005 2006 2007 2008

Contribution of IT industry to Indian GDP

% of Indian GDP



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830000

1058000

1293000

1630000

2000000

0

500000

1000000

1500000

2000000

2500000

2004 2005 2006 2007 2008

Number of employees in IT Sector (Direct employment)

IT industry provides direct employment to more than 20 lakh people, indirect

employment number goes far beyond..!!


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Indian IT market is dominated by a few large companies with presence of a number

of small and medium companies .

Indian IT industry Revenue Break-up by company


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FDI upto 100% is allowed under the automatic route in the IT sector and IT-enabledservices. However, a pertinent condition is that, 26 percent of their equity will be spenton welfare activities for the Indian population in five years.

Software Technology Parks (STP) have been a major initiative in India to drive in ForeignDirect Investment in the computer software industry. These Software Technology Parks

provide highly developed infrastructure and facilities that attract foreign investors.

Regulatory measures by the Indian government have also played a positive role in thisregard. Measures like increased freedom of recruiting and laying-off employees, taxbenefits, skilled workforce and easing of export producers have contributed to thegrowth of FDI in this sector.

Industrial Licensing has been virtually abolished in the Information Technology sector.

Foreign Direct Investment (FDI) into Indias information technology (IT) sector haveshown a record increase of over 700% having gone up from Rs.543.66 crore in 2003 toRs.4206.68 crore in 2005.

FOREIGN INVESTMENT IN IT INDUSTRYFOREIGN INVESTMENT IN IT INDUSTRY



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FOREIGN INVESTMENT IN IT INDUSTRYFOREIGN INVESTMENT IN IT INDUSTRY

Source: Department of Industrial Policy & Promotion Ministry of Commerce and Industrywebsite, http://dipp.nic.in/fdi_statistics/india_fdi_index.htm

Note: Electrical equipments includes computer software & electronics hardware


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Formative years (till 1991) India's IT Services industry was born inMumbai in 1967 with the

establishment of Tata Group in partnership with Burroughs.

In 1968, Tata Consultancy Servicesestablished in SEEPZ,Mumbai by

the Tata Groupwere the country's largest software producers during the1960s.

The first software export zone SEEPZ was set up in 1973, the old avatar ofthe modern day IT park.More than 80 percent of the country's softwareexports happened out of SEEPZ,Mumbai in 80s.

The National Informatics Centre (NIC) was established inMarch 1975 and

inception of The ComputerMaintenance Company (CMC) followed inOctober 1976.

Between 1977-1980 the country's Information Technology companiesTata Infotech, Patni Computer Systems and Wipro had become visible.

AGE OF INDUSTRYAGE OF INDUSTRY


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1991-2001

In 1991 the Department of Electronics broke this impasse, creating a

corporation called Software Technology Parks of India (STPI) that, being

owned by the government, could provide VSAT communications without

breaching its monopoly. Videsh Sanchar Nigam Limited (VSNL) introduced Gateway ElectronicMail

Service in 1991, the 64 kbit/s leased line service in 1992, and commercial

Internet access on a visible scale in 1992.

The Information Technology Act 2000 created legal procedures for

electronic transactions and e-commerce. The share of IT (mainly software) in total exports increased from 1 percent

in 1990 to 18 percent in 2001

AGE OF INDUSTRY (CONT)AGE OF INDUSTRY (CONT)


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2001- Present

On 25 June 2002 India and the European Union agreed to

bilateral cooperation in the field of science and technology. A

joint EU-India group of scholars was formed on 23 November

2001 to further promote joint research and development.

Bangalore emerged as a leading IT hub in India, known asa Silicon Valley of India and contributes 33% of Indian IT

Export.

AGE F I STR ( T )AGE F I STR ( T )



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Future of Indian IT Industry

The Indian IT sector persists to be one of the flourishing

sectors of Indian financial system indicating a speedy

expansion in the coming years.

As per NASSCOM, the Indian IT exports are anticipated to

attain US$ 175 billion by 2020 out of which the domesticsector will account for US$ 50 billion in earnings with new

prospects from BRIC nations and Japan for its outsourcing

operations.

AGE F I STR ( T )AGE F I STR ( T )


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