INFORMATION TECHNOLOGY
IN INDIA
Ishtyaque Ajmeri, Shashank Saxena, Shubham
Kaushik, Sachin Mahajan, Rakesh Kumar Goyal,
Suraj Bhan
INTRODUCTION
It has grown from US $ 150 million in 1991-92 to
US $ 64 billion in year 2008.
India’s GDP has grown significantly from 1.2% in
1999-2000 to cross 5.5% in FY08.
The sector has been growing at an annual rate of
28% per annum.
IT Exports is account for 35% of the total exports
from India.
Market Structure
Revenue Earned by Export of Software
and Hardware
(32%)
(16%)
(35%)
Market Share
Policies for IT Industry
IT Policy in India can be divided into two distinct periods
From the mid-1960s through the early 1990s
•1960s and 1970s: Indigenization and self-sufficiency
•1980s: Partial liberalization and industry promotion
From 1990s to present: liberalization and promotion of IT
industry in India
1960s and 1970s:
•IBM’s entry and exit.
•In 1971, formation of the Department of Electronics (DoE)
and a new Electronics Commission
•In 1975, in a landmark development, the US computer maker,
Burroughs, entered into a joint venture with Tata Consultancy
Services
•Computer Maintenance Corporation (CMC)
1980s: Partial liberalization and
industry promotion
India’s IT policies in the 1980s were aimed at
modernizing an industry.
Exports of software and peripherals were now promoted
and the import of mainframes and supercomputers was
encouraged under certain conditions.
Computer policy of 1984 (Hardware policy)
1986 Software Policy
In 1988, the National Informatics Center set up NICNET.
After the 1984 Computer Policy announcement,
production shot up by 100% while prices declined by 50%.
Liberalization in IT Industry
Change in industrial policy leads to
transformation of IT industry.
Post 1990, a 100% income tax exemption was
extended to profits from software exports, and
the double taxation of software imports was
eliminated.
The duty for software imports was reduced to
110% in 1992, 85% in 1993, split in 1994 to 20%
for applications software and 65% for system
software, and then reduced to 10% for both
categories in 1995.
DoE was reorganized and copyright act was
renewed.
STPI was created to facilitate growth of
software industry.
In 1996 internet services was started in India
by VSNL a public sector company.
Multiple technologies were started evolving
due to development of IT industry.
Various steps had been taken towards a
stronger infrastructure and reduced cost base.
Policies in IT Hardware Industry
Peak rate of basic customs duty is 10%.
Customs duty on specified raw materials and
inputs used for manufacture of electronic
components and optical fibers / cables is 0%.
The mean rate of excise duty (CENVAT) is 8%.
Microprocessors, Hard Disc Drives, Floppy Disc
Drives, CD ROM Drives, DVD Drives/DVD Writers,
Flash Memory and Combo-Drives are exempted
from excise duty.
Central Sales Tax (CST) has been reduced from
3% to 2%.
Porter 5 Forces Model
BUDGET 2009-10
Actual:
Removed Tax holiday under STPI scheme
extended by one year.
Fringe Benefit Tax abolished.
8 per cent excise duty on packaged software
which was 12% earlier.
Impact:
Bottom line of IT companies to stay healthy with
lesser tax outgo.
Will help companies do away with administrative
costs and offer stock option as tool to retain
employees.
Packaged software to become cheaper with
removal of duty.
Other Remittances
100% FDI allowed in IT sector
Industrial Licensing has already been
abolished except defense and aerospace
sector.
Specified parts to be used in hardware
industry are exempted from customs duty.
Information Technology and India’s
Economic Development
India’s IT success represents the emergence
of another elite enclave, with increased
inequality the result.
The IT sector can be an important source of
growth for India if the global demand for
these products and services is likely to grow
rapidly.
If the growth of the sector has positive
spillover benefits to the rest of the domestic
economy.
Cont.…
Since Indian software firms can compete
successfully abroad, they should also be able
to succeed in their own backyard. In fact,
they have advantages in the domestic
market, knowing their customers better, and
being closer to them.
On the other hand, a poor domestic
infrastructure, dependence on imported
hardware, late mover disadvantages, and
lack of economies of scale and learning by
doing, can all reduce or eliminate any
advantage that Indian software firms might
have over foreign competitors.
Cont….
Reputation and experience effects, on the
other hand, enhance the importance of
economies of scale and scope.
Internet access is probably the most
attractive use for many potential consumers
of IT in India.
The possibility of designing and building
lower-cost access hardware in India may
represent an opportunity for the domestic IT
industry.
Direct impact of IT industry – On Indian
economy
The sector is proving to be the major growth pole
within the services sector, which in turn drives
several economic indicators of growth in the country.
A few key indicators of direct contribution are:
Growing share of the country’s GDP
Boosting the foreign exchange reserve of the
country
Employment generation
Indirect impact of IT industry – To
Indian economy.
Additional employment generation
Driving growth of other sectors of the economy
Encouraging balanced regional development
Spurring first generation entrepreneurship
Improving the product/service quality level
Front runner in practicing good corporate
governance
Boosting the image of India in the global market
Core competencies of IT Industry of
India
Availability of Large Human Resources
Indian Education System
Quality Manpower
Government Policies
Cost of Labour and resources
Role of NASSCOM Foundation
Providing hand holding support and advisory
services
Dissemination of information on best practices,
international benchmarks and monitoring
mechanisms
Identify sector specific investment opportunities
Initiate award/recognition system for socially
relevant community activities
Capacity building of NGOs
Future overview
The Indian IT-ITeS industry is expected to
grow at a CAGR of 15.6% to reach Rs
4,582.28 bn during 2008-2011.
The domestic ITeS market is expected to
reach Rs 362.38 bn by 2011, at a CAGR of
264% during 2008–2011.
CONCLUSION
The Indian IT / ITES industry has been one
of the great success stories of modern India.
The power of middle class, first generation
entrepreneurship in India.
The Indian IT/ITES industry has contributed
significantly to Indian economic growth in
terms of GDP, foreign exchange earnings and
employment generation.
Cont….
A few key indicators of direct contribution are:
Growing share of the country’s GDP: GDP has been
steadily increasing from a share of 1.2% in FY98 to
5.8% in FY09.
Boosting the foreign exchange reserve of the
country: IT-BPO exports (including hardware exports)
reached USD 47.3 billion in FY2009.
Employment generation: Direct employment in the
sector 1.6 million by end of FY08.
“The success of Infosys, Wipro, Tata
Consultancy Services and other companies
had changed the lives of millions of Indians
and propelled the country's economy to a
record-breaking growth ”
“The growth should not be measured in
Dollars alone, but in the difference it makes
in transforming a society for the better.”
Sonia Gandhi
THANK YOU
