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

Here comes your footer  Page 15

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.
Here comes your footer  Page 27