Indian Information Technology Industry – a Future Outlook

Undisputedly, IT industry is one of the fastest growing industries among whole world. Indian IT industry has placed itself in the third position due to domestic as well as international market demand. Though ‘IT’, a small word but it converts the entire world into a global village. The intensification of IT still lies in phenomenon and fantasy. From the last decade India has became one of the most important offshore destinations amongst the Asia-Pacific region. During 4 to 5 years it increases up to 3 fold and captured the leadership position in the world market. Indian IT sector acquires 3% of the total global market and it is expected to increase its volume in the next few years. IT and ITES has recorded $ 39.6 billion revenue in the year of 2006-07 that register a growth of 30.7% beating the projected growth of 27% as per NASSCOM estimation. Over times, India has become ‘IT’ hub.  The total revenue earned by IT USD 48.1billion in 2007 and expected to cross 64 bn in 2008 out of which export amounted to 40.8 bn and domestic 23.2 bn and by 2010, IT revenue is anticipated   73-75 bn.

The strategic review by NASSCOM, 2008 also pointed out as the proportion of national GDP Indian IT sector revenue has grown from 1.2% in FY 1998 to a predictable 5.5% in 2008. Net value added by this sector to the economy is estimated at 3.3% to 3.9%. According to NASSCOM, about 3 million people can be employed in indirect and induced employment like telecom, power, facility management, IT transportation, catering and other services. To facilitate the penetration of IT and ITES in rural areas, the Indian Government has formulated a proposal to establish 100000 Common Service Center (CSC) in rural areas. Indian Government takes the initiative to execute the scheme through PPP (Private Public Partnership) to connect rural people to World Wide Web and the sanctioned amount is 57.42 billion for such proposal. Indian Companies are enhancing the global services delivery capabilities through a combination of Greenfield initiatives, cross border mergers and acquisitions, partnership and alliances with local players. This enabling them to execute end-to-end delivery of new services. The reasons behind the super normal growth of IT industry in India attributed to abundant youth talent ages less than 25 years, skilled English speaking man pool, comparative cost advantages, emphasis on quality and information security, flexible govt. policies, regularity environment etc. Right now India possesses a chunk of youth talent who want to become tech people. This demographic profile is unique and inherent. British colonization also helps to generate an English speaking expert human resources pool. Above all comparative cost advantage has placed India in a very good position. Aboard client mostly from U.S.A and U.K, they can save 25%-50% over original cost base in outsourcing business. It is shown that 10-15% wage inflation in India amounts to a lower dollar value increase in the payroll compared to the 3-4% average wage inflation in the developed countries. Previously 69.4% outsourcing job was coming from U.S.A and 22.6% from U.K. Now at present this proportion has changed outsourced job from U.S.A and U.K are respectively 61.4% and 30.1%. Technology diffusion helps to pull down the telecom cost.

Most of the Indian tech companies have obtained ISO, CMMI, Six-Sigma certificates to provide the service at international standard and it is expected that in near future India will have the status of having highest number of ISO 9000 companies in the world. 82 Indian companies certified at SEI CMM Level 5, which is higher than any other country in the world, possess. India based companies and MNCs constitute the largest number of quality certification achieved by any single country. Indian Govt. has played a very crucial role in IT sector. Minimal regulation and policy restrictions by Central as well as state government. has facilitated in its growth. More over STPI (Software Technology Park of India) scheme has played a pivotal role in catalyzing the growth of this sector and rapid rise across the country. Government of India has placed IT sector in SEZ (Special Economic Zone) hence it enjoyed 10 years tax holiday. To boost the overall growth of IT sector Indian Govt. has withdrawn the constraints in location selection, complicated license policy etc. SEZ become huge success in attracting Foreign Direct Investment. Apart from these initiatives proper infrastructure development is also very crucial for IT growth. Proper infrastructure development in all over country may place India at a prime position in global IT map. Indian IT industry is purely export oriented. Most of its revenue comes from IT-BPO services known as Business Process Outsourcing, divided into two sections – i) back office sourcing including internal business functions, ii) Front office sourcing including external business function like customer related services such as marketing , technology support etc. Indian IT sector largely depend on outsourcing job. However, the whole world is affected by U.S growth recession and India is no exception that is alarming to this sector. This fiscal IT and BPO sector will grow at 23-24% as against last year’s 29%. NASSCOM assumed that Indian IT and BPO sector may slow down to 3-4% in the current year as against that of last year due to uncertainty in global economy, frequent fluctuation in the value of dollar, growing competition from neighbor countries like China, Philippines etc and manpower crisis which may become more difficult in coming days. NASSCOM has estimated shortage of five lakhs manpower in this sector by 2010. The BPO sector is seeking for tier-II and tier-III cities to expand the business of BPO despite of concentrating of seven cities. As US, market response is not so good India is trying to explore new market in Australia, European Union, and Japan. IT sector gets 40% of revenues from new deals and 605 from the existing one. India IT sector directly or indirectly hugely depends on U.S.A and U.K for outsourcing. Recently the recession in U.S economy adversely affect Indian economy. If Indian BPO does not have any new clients from these countries then business will follow the decline trend. Currently the financial turmoil largely affects the global economy and its result is reflected into Indian economy. India already experience pinch of it.  It is foolish to think that there will be no recession in the business world but the consequence of it depends on its duration.

The Indian IT remains a success story till now.  However, Indian Government must also be very concerned about this industry. To overcome such critical situation Government should increase the time span of SEZ, which is likely to be ended by 2009, decrease amount of MAT (Minimum Alternative Tax) chargeable to this sector, which is pulling down the robust profit earned by this sector, simplifying the license policy to attract more companies in this industry. Indian IT industry is a flourishing industry and the liberalized policies of Government help this sector to grow gradually. IT services and information technology enabled services have shown unprecedented growth. The demand for such services has grown substantially. The growth of the Indian IT industry is likely to be very good in future. The future trend of Indian IT industry appears to be very bright, promising and prosperous.