CONTRIBUTION OF INDIAN INFORMATION TECHNOLOGY SECTOR IN ECONOMIC DEVELOPMENT

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1 CONTRIBUTION OF INDIAN INFORMATION TECHNOLOGY SECTOR IN ECONOMIC DEVELOPMENT S. Sajid Hussain 1, Dr. S.M. Anas Iqbal 2 1 Research Scholar, School of Commerce, Devi Ahilya Vishwavidyalaya, Indore, Madhya Pradesh, India 2 Director, Vishisht Institute of Professional Studies and Research (VIPSAR), Indore, Madhya Pradesh, India ABSTRACT Information Technology (IT) sector has emerged one of the most dynamic and fastest growing sectors in India. Indian Information Technology (IT) Industry has tremendous potential to become an engine of growth and productivity for all sectors of the economy and particularly for the country. The IT sector, constituted by the software and services, Information Technology enabled Services (ITeS) and the hardware segment, has played a major role in the development and transformation of Indian economy and is responsible for the global recognition of India as a Soft Power. The contribution of the IT sector to India s GDP rose approximately to 9.3 percent in from 1.2 percent in The revenue is estimated to reach at USD billion in as compare to USD billion in previous year , registering an increase of around 9.. The consistent growth of the IT Sector has created phenomenal wealth, employment, exports and a significantly large reservoir of highly competent technocrats and knowledge workers. The aim of this paper is to explore the contribution of Information Technology/Information Technology enabled Service (IT-ITeS) Industry in growth of Indian Economy. The paper is to examine the growth and performance of Information Technology/Information Technology enabled Service (IT-ITeS) sector in India. Keywords: Transformation, Consistent growth, Employment, Soft Power. 1. Introduction The origin of Information Technology (IT) Industry in India has been traced in 1974, when the Burroughs Corporation asked Tata Consultancy Services, its India sales agent to write software code for its U.S clients. Information Technology (IT) sector has emerged one of the most dynamic and fastest growing sectors in India. Indian IT Industry has tremendous potential to become an engine of economic growth and productivity for all sectors of the economy and particularly for the country. The IT sector, constituted by the software and services, Information Technology enabled Services (ITeS) and the hardware segment, has played a major role in the development and transformation of Indian economy and is responsible for the global recognition of India as a Soft Power. IT-ITeS industry in India has played a key role in putting India on the global map and has built up valuable brand equity for itself in the global markets. The emergence of the Information Technology/Information Technology enabled Services (IT-ITeS) industry in the country has often been considered symbolic of India s integration into the global economy (Upadhyaya and Vasavi, 2008). India is considered as a pioneer in software development and a favorite destination for IT - enabled services and has played a significant role in transforming India s image from a slow moving bureaucratic economy to a land of innovative entrepreneurs and a global player in providing world class technology solutions and business services. India is now one of the biggest IT capitals in the modern world and has presence of all the major IT players. TCS, Infosys, Wipro and HCL are few of the household names of IT companies in India. IT-ITES sector is a large employment generator and has catalyzed the growth of several ancillary industries such as transportation, real estate, catering, security and housekeeping. IT industry in India has been one of the most significant growth contributors for the Indian economy and has been one of the key driving forces fuelling India s economic growth. 2. Objectives of the Study 1. To explore the contribution of Information Technology/Information Technology enabled Service (IT-ITeS) Industry in growth of Indian Economy. 191

2 2. To examine the growth and performance of Information Technology/Information Technology enabled Service (IT-ITeS) sector in India. 3. Information Technology (IT) and Economic Development India s competence in Information Technology (IT), particularly in software and Information Technology enabled Services (ITeS) has received global attention and has become a target destination for multinationals to back end their IT operations in India. India is referred to as the back office of the world, with its strong cost advantages and skilled work force. IT-ITeS industry in India has today become a growth engine for the economy; contributing substantially to increase in the GDP, urban employment and exports to achieve the vision of a young and resilient India (Jain, 2009). The contribution of the IT sector to India s GDP rose approximately to 9.3 percent in from 1.2 percent in This consistent growth of the IT segment has created phenomenal wealth, employment and exports. As per the BRIC Report of Goldman Sachs, India is likely to be the only country among BRICs to clock GDP growth between 5% and 6% across all years till This would fuel growth in a host of downstream industries where IT adoption would be high and has opened up new possibilities for both, companies as well as the country at large. Revenue The Indian IT-ITeS Industry is persistently continuing its growth path; demonstrated its flexibility to adjust with turbulent economic conditions in order to achieve double digit growth. Overall revenue of IT/ITeS Industry has reached USD billion in , registering a growth of around 9% over last year. The total export revenue (excluding hardware) of IT-ITeS has grown from USD 68.8 billion in to USD billion in , with CAGR of about percent. While as the revenue of domestic segment (excluding hardware) has reached USD 21.7 billion in from USD 19.0 billion in , with 3.37 percent of CAGR, which is the testimonial of its growth and performance. Table 1: IT-ITeS Industry Revenue Trends (in USD Billion) Year Segment Billion Growth Billion Growth Billion Growth Billion Growth Billion Growth CAGR Exports % % % % 11.88% Domestic % % % % 3.37% Total % % % IT-ITeS Revenue Trends Exports Domestic % 20.06% 17.87% 17.68% 16.76% 78.36% 79.94% 82.13% 82.32% 83.24% Exports Information technology industry caters both the domestic as well as foreign market and has the tremendous potential of becoming an engine of accelerated economic growth and productivity for all sectors of the economy. But it is the software and services sector which has made impressive growth in the foreign as well as domestic market. IT-ITES exports (excluding hardware) has reached USD billion in , growing by 10.22% over and contributing nearly 83% of the total IT-ITES revenues. The total IT services exports (excluding Engineering, R&D, BPO and Software products) in has registered a y- o-y growth of 10.31%, generating exports of USD 61.0 billion, driven by collaboration, communication and business intelligence projects. The contribution of ITeS-BPO which accounts 23.11% of USD 68.8 billion in has reached 22.63% of USD billion in , with CAGR of The table below clarifies that the fastest growing segment is software products which is growing at a CGAR of % contributes largely to Industry in comparison to other segments of the IT-ITeS Industry. 192

3 Table 2: Segment wise Export Revenue Trends in IT-ITeS Industry (in USD Billion) Year CAGR (2012- Segment Billion Growth Billion Growth Billion Growth Billion Growth Billion Growth 16) IT Service % % % % 11.19% ITeS-BPO % % % % 11.3 Software Products, Engineering Service, R&D % % % % Total % % % % 11.88% Export Revenue Trends IT Service ITES-BPO Software Products, Engineering Service, R&D % 20.45% 20.78% 23.11% 23.92% 23.37% 23.01% 22.63% 57.99% 56.08% 56.36% 56.54% 56.59% Domestic Market The domestic market is the significant contributor to the total revenue of IT-ITeS Industry. Growing domestic market has facilitated rapid development of Indian Information Technology Industry. The size of domestic market revenue (excluding hardware) has reached INR crore in , as compared to INR crore in , a y-o-y growth of 9.22%. The contribution of ITeS-BPO which accounts 16.18% of INR crore in has reached 16.59% of INR crore in , with CAGR of 11.99% driven by demand from select customers reverting to outsourcing business processes, especially from automotive and retail sectors. The domestic software products has reached INR crore in , with CAGR 11.57% due to increased demand for manufacturing, retail, healthcare, education sectors. Stable government with a technology focused growth agenda is further boosting technology adoption in the domestic market. Table 3: Segment wise Domestic Revenue Trends in IT-ITES Industry (in INR Crore) Year CAGR (2012- Segment Crore Growth Crore Growth Crore Growth Crore Growth Crore Growth 16) IT Service % % % % 11.04% ITeS-BPO % % % % 11.99% Software Products, Engineering Service % % % 11.57% Total % % % %

4 Millions Asia Pacific Journal of Research Domestic Revenue Trends IT Service ITES-BPO Software Products, Engineering Service % 19.65% 19.57% % 16.18% 16.78% 17.01% 16.67% 16.59% 64.19% 63.57% 63.36% 63.33% 63.59% Employment Scenario Indian Information Technology (IT) Industry is developing as the biggest source of revenue and employment generator, it has catalyzed the growth of several ancillary industries such as transportation, real estate, catering, security and housekeeping. The success of IT-ITeS industry in India is due to the availability of skilled English speaking workforce; has been a major reason behind India s emergence as a global outsourcing hub. The consistent growth of the IT-ITeS Industry has created phenomenal wealth, employment, exports and a significantly large reservoir of highly competent technocrats and knowledge workers. The total IT Software and Services employment has reached million in the year and the direct employment contributes in the total employment is about million. Unlike many other sectors of the economy, employment in the IT Industry was not significantly affected by the recession of The industry lost about 1 percent of its employment in 2009 but regained momentum in The high demand for the services provided by this industry has created a large number of fast-growing and high-paying IT jobs. Table 4: Employment in IT-ITeS Industry (in Millions) Year Segment Millions Growth Millions Growth Millions Growth Millions Growth Millions Growth IT Service & Exports % % % % BPO Exports % % % % Domestic Market % % % Total Employment % % % % Source: Compiled and Computed from Data available NASSCOM Total Employment Employment 4. Conclusion Information Technology (IT) Industry has emerged as one of the fastest growing industries in India; has tremendous potential to become an engine of economic growth and productivity for all sectors of the economy and particularly for the country. The industry has helped India to transform from a rural and agriculture-based economy to a knowledge based economy. India is one of the biggest IT capitals in the modern world and a favorite destination for Information Technology enabled Services (IT-ITeS). The export segment performance of IT-ITeS Industry during the last decade has been exceptional. As a result, IT-ITES exports (excluding hardware) accounts nearly 83% of the total IT-ITES revenues. Apart from wealth creation and large export revenues, Indian IT-ITeS Industry has also provided large scale employment to educated mass. The total IT Software and Services employment has reached million in the year and the direct employment contributes in the total employment is about million. Therefore, the present study concludes that the Indian IT-ITeS Industry is growing persistently and positively to contribute in terms of income and employment to the educated mass and plays a vital role in strengthening the economical and technological foundations of India. 194

5 5. References 1. IT & ITeS Industry in India. India Brand Equity Foundation (IBEF). Retrieved January 7, 2017 from 2. Jain, S. (2009) Impact of IT Industry on the Indian Economy. Phd Thesis, Commerce & Business Administration, Chaudhary Charan Singh University, Meerut, India 3. Robust growth for the Indian IT-BPM Industry. National Association of Software and Service Companies (NASSCOM). Retrieved January 5, 2017 from 4. Software and Services Sector. Electronics & IT Industry, Ministry of Electronics and Information Technology, Government of India. Retrieved December 25, 2016 from 5. The Global Business Hub. (2013). Services Sector Profile Financial Services, Tourism and IT/ITeS. Retrieved December 25, 2016 from 6. Upadhyay, C., & Vasavi. A. R. (2008). In an Outpost of the Global Economy: Work and Workers in India's Information Technology Industry. New Delhi: Routledge 195