MARKET OVERVIEW

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 India’s 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 was expected
to reach 2.23 million and eight million, respectively.
• Domestic market revenues were expected to touch US$ 24.3 billion in 2008-
09.
• Domestic market revenues have been growing at a CAGR of 24 per cent for
the last five years.

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

NASSCOM website, www.nasscom.org, accessed 20 September 2009
 MARKET OVERVIEW (CONT…)
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

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

NASSCOM website, www.nasscom.org, accessed 20 September 2009
 MARKET OVERVIEW (CONT…)
More than 80% of revenues come from Exports and only 20% from
domestic business
Revenues from domestic and export (in USD billion)

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

NASSCOM website, www.nasscom.org, accessed 20 September 2009
 MARKET OVERVIEW (CONT…)
Revenues by segment –Indian IT industry

71.7
48.0

37.4

28.1

21.7

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

ITeS: Industry profile, April 2009, CRIS INFAC
Note: E –estimates
 MARKET OVERVIEW (CONT…)

IT revenue in 2008-09
(US$ bn) Domestic revenue segmentation of 2008-09
(US$ bn)
50
45
IT services
40 9%
35 8%
30 ITeS-BPO
25
20 49% Software
15 products and
10 34% engineering
5 services
0
rts

tic

Hardware
es
po

m
Ex

Do

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

NASSCOM website, www.nasscom.org, accessed 20 September 2009
 MARKET OVERVIEW (CONT…)
IT services: Anchor segment of the sector
 The Indian IT services market grew by 23 per Source of Revenue by Verticals, 2008-09
cent between 2005-06 and 2008-09 and the
revenues are estimated at nearly US$ 8.3 billion 9%
in 2008-09. 3%
2%
8%
41%
 The banking, financial services and insurance
(BFSI) vertical continues to account for the
17%
largest share of IT/ITeS services at 41 per cent.

 Hi-Tech/ telecom vertical accounts for the 20%

second-largest share of the pie at 20 per cent. BFSI Hi-tech/Telecom

Manufacturing Retail
Other verticals such as manufacturing, retail,
Media Publishing
media and healthcare are rapidly gaining pace.
Entertainment

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

 MARKET OVERVIEW (CONT…)
IT industry contributes to around 5.2% to Indian USD 1 trillion GDP.

Contribution of IT industry to Indian GDP

6

5 5.2 5.2
4.7
4 4.1
3.6
% of Indian GDP
3

0
2004 2005 2006 2007 2008
Source:"The IT-BPO Sector in India -Strategic Review 2009: Executive summary",
NASSCOM website, www.nasscom.org, accessed 20 September 2009
 MARKET OVERVIEW (CONT…)
IT industry provides direct employment to more than 20 lakh people, indirect
employment number goes far beyond..!!

Number of employees in IT Sector (Direct employment)

2500000

2000000 2000000

1630000
1500000
1293000
1000000 1058000
830000

500000

0
2004 2005 2006 2007 2008

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

NASSCOM website, www.nasscom.org, accessed 20 September 2009
 Indian IT industry Revenue Break-up by company

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

of small and medium companies .
 FOREIGN INVESTMENT IN IT INDUSTRY
• FDI upto 100% is allowed under the automatic route in the IT sector and IT-enabled services.
However, a pertinent condition is that, 26 percent of their equity will be spent on welfare
activities for the Indian population in five years.

• Software Technology Parks (STP) have been a major initiative in India to drive in Foreign Direct
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 this regard.
Measures like increased freedom of recruiting and laying-off employees, tax benefits, skilled
workforce and easing of export producers have contributed to the growth of FDI in this sector.

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

• Foreign Direct Investment (FDI) into India’s information technology  (IT) sector have shown a
record increase of over 700% having gone up from Rs.543.66 crore in 2003 to Rs.4206.68 crore
in 2005.

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

NASSCOM website, www.nasscom.org, accessed 20 September 2009
 FOREIGN INVESTMENT IN IT INDUSTRY

Note: Electrical equipments includes computer software & electronics hardware

Source:” Department of Industrial Policy & Promotion Ministry of Commerce and Industry website,
http://dipp.nic.in/fdi_statistics/india_fdi_index.htm
 AGE OF INDUSTRY
Formative years (till 1991)
• India's IT Services industry was born in Mumbai in 1967 with the
establishment of Tata Group in partnership with Burroughs.
• In 1968, Tata Consultancy Services—established in SEEPZ, Mumbai by the Tata
Group—were the country's largest software producers during the 1960s.
• The first software export zone SEEPZ was set up in 1973, the old avatar of the
modern day IT park. More than 80 percent of the country's software exports
happened out of SEEPZ, Mumbai in 80s.
• The National Informatics Centre (NIC) was established in March 1975 and
inception of The Computer Maintenance Company (CMC) followed in October
1976.
• Between 1977-1980 the country's Information Technology companies Tata
Infotech, Patni Computer Systems and Wipro had become visible.
 AGE OF INDUSTRY (CONT…)

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 Electronic Mail
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…)
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 as
a Silicon Valley of India and contributes 33% of Indian IT
Export.

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

NASSCOM website, www.nasscom.org, accessed 20 September 2009
 AGE OF INDUSTRY (CONT…)
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 domestic
sector will account for US$ 50 billion in earnings with new
prospects from BRIC nations and Japan for its outsourcing
operations. 

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

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