IT industry in India
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The Indian IT Industry has grown from a mere USD 150 million in 1990-91 to USD 50 billion in 2006-07 with annual growth rates of nearly 30% in the last 10 years. [1] [2]
The growth of the Indian economy is mainly owed to the IT sector and the liberalised government policy of reduction in telecommunication cost and import duties on hardware and software. [3] Apart from the Multinationals like IBM, HP setting up shop in India for cost advatages and cheap labour, this industry has seen growth of successful Indian companies like TCS, Infosys, Wipro, HCL, Patni etc. The industry's contribution to GDP has significantly grown from 1.2% in 1999-2000 to 4.8% in 2005-2006[4]
[edit] Growth phase
With a CAGR of over 50% between 1992 and 2002, the Indian software sector has expanded twice as quickly as the American software sector[5]
There are many economic and political factors that is expected to have contributed to the growth of the Indian IT industry. In 1968 the Tatas conglomerate set up the Indian software services firm Tata Consultancy Services. Later, in 1970 IBM had to exit India due to high import duties. In 1991, due to a balance of payments crisis the government liberalized the economy. In 1994 the telecom sector was liberalized that led to the growth of the industry and increased competitiveness.[6]
The Y2K problem is said to be the trigger that helped Indian software industry flourish. TCS determined that it's Casepac tool developed for IBM can be used to scan software for Y2K problems.[7]
The success story of the Indian IT industry has been attributed to a combination of resource advantage, apt timing and less intrusive encouragement from the government.
[edit] Industry structure
The Indian IT industry can be broadly classified into domestic and export markets. The exports market constitutes about 75% of the total revenue generated by the Indian software services sector. The domestic segment can be classified into four broad categories - IT services, Software segment including engineering and R&D services, ITeS- BPO, and Hardware.
In the financial year 2005-06, Hardware contributed for about 50% of revenues for the domestic IT market, while IT had a share of 34%, the engineering services and R&D contributed 10% and ITeS- BPO segment 7%. [8]
| Particulars | FY 2004 | FY 2005 | FY 2006 | FY 2007E |
|---|---|---|---|---|
| IT Services | 10.4 | 13.5 | 17.8 | 23.7 |
| - Exports | 7.3 | 10.0 | 13.13 | 18.1 |
| - Domestic | 3.1 | 3.5 | 4.5 | 5.6 |
| ITES-BPO | 3.4 | 5.2 | 7.2 | 9.5 |
| - Exports | 3.1 | 4.6 | 6.3 | 8.3 |
| - Domestic | 0.3 | 0.6 | 0.9 | 1.2 |
| Engineering services, R&D and Software products | 2.9 | 3.9 | 5.3 | 6.5 |
| - Exports | 2.5 | 3.1 | 4.0 | 4.9 |
| - Domestic | 0.4 | 0.7 | 1.3 | 1.6 |
| Hardware | 5.0 | 5.9 | 7.0 | 8.2 |
| Total IT industry | 21.6 | 28.4 | 37.4 | 47.8 |
| - Exports | 13.4 | 18.2 | 24.1 | 31.9 |
| - Domestic | 8.3 | 10.2 | 13.2 | 15.9 |
