THE INDIAN IT-ITES EXPORT
INDUSTRY
MARKET OVERVIEW
• The Indian IT-ITES industry grew at a rate of Revenue segmentation
33% in FY 2009 of IT-ITES sector in
2009(US$ billion)
• Contribution of IT/ITeS industry to India’s GDP EXPORTS DOMESTIC
has grown from 1.2 per cent in FY1998 to an
5.5 per cent in FY2009
36%
• Potential size of India’s offshore IT/BPO 64%
industry in 2015 is estimated at US$ 120 to 180
billion (10 to 12 per cent of GDP)
IT/ITES INDUSTRY:
On a steady growth track
• Direct employment for two million people and an estimated
capacity for 7 to 10 million by 2015
• Revenues of US$ 64 billion in FY2008, recording a CAGR of
31 per cent over the last five years
• Domestic market comprises hardware, software and IT-BPO
services
• The sector estimated well within reach of the US$ 70 billion
exports target; growth at 23.2 per cent required to reach
exports target in 2009-2010
SOFTWARE EXPORTS-segment wise
FY 2008-09
FY 2007-08
IT services
IT services ITES/BPO
ITES/BPO enterprise applications
Enterprise applications
25%
24%
50% 55%
20%
26%
Large, Medium, and Small STPI Units
In India, majority of the exporting units have been SME’s, which constitute ~99.48% to
the total IT exporting units in India. Of these roughly 83.49% are small enterprises with
revenues less than INR10 Crores, while the remaining are medium sized enterprises with
revenues between INR 10 and 100 crores
Small & Medium sized units contributed around 27% of the IT exports, which is
about INR 30634 Crores, in 2005-06.
Large units, inspite of being less than 1% of the total exporting units, contribute to
73% of the exports from India.
Source: STPI
EXPORTING UNITS Share of exports by Large units & SME
INDIA & THE WORLD
India accounts for 65 percent of the
global market in offshore IT & 46
percent of the ITeS market
Total export revenues earned by IT-
ITeS sector in 2006-07–INR 161,925
crores
INDIA & THE WORLD
COST ADVANTAGE
INFRASTRUCTURE
QUALITY FACTOR
The Cost Advantage
Average wage / year (in thousand US dollars)
30 25 28
25
20
15
8.9
10 7.2 8
6.4 6.5 7.2
5.88 6
5 2.4
0
Source: NASSCOM
Costs for offshore work
30-50% lower than in US/Europe
The Infrastructure Advantage
Standardisation Testing and Quality Certification (STQC) programme
One-stop solution to all quality requirements of electronics industry
Software Technology Parks
Single point
Up to No
Exemption Single custom
100% corporate
from local window bonding
foreign income tax
duties government and
equity up to
and taxes clearance export
permitted March 2010
certification
India Advantage:
Growing Knowledge Pool
Global Growth in Working - Age Availability of Skilled Availability of Qualified
Population (15~64) Over the Next Manpower, 2003 Engineers, 2003
Six Years ( Mln )
Stock Addl working 10 = High 10 = High
Position 2004 age population
by 2010 1 = Low 1 = Low
World 4,087 375 Singapore 7.4 India 8.9
India 675 83 USA 7.3 Singapore 7.9
Africa 477 73 India 7.2 USA 7.3
China 921 56 Germany 7.1 Hong Kong 6.9
S E Asia 355 41 Hong Kong 7.1 Germany 6.7
L America 352 38 Japan 7.0
Taiwan 6.7
W Asia 127 20 Taiwan 6.6
Mexico 6.4
5.7
USA 123 13197 Korea Korea 5.8
W Europe 0.04 Mexico 5.3
Japan 85 -3 China 4.3
China 3.9
Source:
ISO:9001:2000
World Bank,
World Development
Source: World Bank,Indicator Report
FDI CONFIDENCE INDEX
China 2.20
India 1.95
United States
1.42
United Kingdom
1.40
Poland 1.36 FDI Confidence
Index 2008 shows
Russia 1.34
India as 2nd most
Favoured
Brazil 1.34
destination
Australia 1.28
Germany 1.27
Hong Kong 1.21
Source: AT Kearney
IT/ITeS sector: Value chain
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GOVERNMENT INITIATIVES AND PROGRESSIVE POLICY REFORMS
• Establishment of a nodal agency (STPI)
• Fiscal benefits like tax holidays to attract investment into the industry
• Basic Infrastructure
• Single-window clearances for setting up Export Oriented Units (EOUs)
• Telecom sector deregulation
• Sector deregulated in the mid and late 1990s to allow private sector and MNC
participation
• Regulatory reform to allow adoption of new technologies
• Enable benefits of free market competition, improved service quality and
declining tariffs
GOVERNMENT INITIATIVES AND PROGRESSIVE POLICY REFORMS (contd…)
• Progressive policy reform (fiscal/trade/other)
• No FDI restrictions
• Fiscal reform (international taxation,overseas
investment, etc.) to facilitate ease of
international transactions
Recent/current initiatives
• Area limit exemptions for the IT-BPO sector in the SEZ policy
• Special emphasis on talent and infrastructure development
• Infrastructure development; provisions designed to
complement the STPI scheme
• Highest level of commitment to addressing core issues
faced by the industry
Semiconductor Policy, 2006
• Encourages FDI investment in
hardware production segment and
provides lucid policy structure for
attracting capital through focus
policies
• Government to bear 20 per cent of
the capital expenditure for
manufacturing units located inside
SEZs and 25 per cent for those
outside SEZs
• Emphasis on wafer fabrication and
ancillary manufacturing plants
STRENGTH
WEAKNESS
INDIAN
SOFTWARE
EXPORT
THREATS
OPPORTUNITIES
High Quality &
Price
Performance
Global Large Pool of
Research & Knowledge
Development Workers
State-of-the-
Infrastructure STRENGTHS art
Technologies
Government Flexibility and
Encouragement Adaptability
High
Growth
Project Management Skills
Localisation Mission Critical Real
Time Operations
WEAKNESS
Venture Capital Lack of Package Orientation
Global
Market
Overseas Domestic
OPPORTUNITIES
Listings Demand:
Outsourcing
Cost
Infrastructure Lack of Speed
THREATS
Protectionism by
Export Destinations
CONCLUSION: An uneven growth
Indian Software Export Industry growing at a very fast pace in their global presence
However , Root is not expanding its base within the country
Fallout : Domestic requirement is not being looked into within the country using
Indian Languages
Expanding Software Export
Low penetration in Indian Market
Result : Non-availability of Information and Knowledge
to the vast section of the citizen
RECOMMENDATIONS
• A supportive policy regime can boost the IT
exports from Tier II and Tier III sectors
• Investments from Central, State and STPI are
required to ensure IT development is realized
in different states
• Exports to be not only limited to software
exports , hardware exports should also be
taken into consideration.
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