India & Information Technology

HE Indian software industry has grown from a
mere U.S. $150 million in 1991-92 to a stag-
gering U.S. $5.7 billion (including over $4 billion
worth of software exports) in 1999-2000. No other
Indian industry has performed so well against global
competition.

The annual growth rate of India’s software exports
has been consistently over 50 percent since 1991.
As per the projections made by the National Asso-
ciation of Software and Services Companies
(NASSCOM) for 2000-2001 (April 1, 2000-March
31, 2001), India’s software exports would be around
$6.3 billion, in addition to $2.5 billion in domestic
sale.

Indian Software Industry 1995-2000
(U.S. $ million)

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(° Source: as | Report)

Today, India exports software and services to nearly
95 countries around the world. The share of North
America (U.S. & Canada) in India’s software exports
is about 61 per cent. In 1999-2000, more than a
third of Fortune 500 companies outsourced their
software requirements to India.

NASSCOM's 1999-2000 survey indicates a reversal
in the mode of services offered by India. In 1991-92,
offshore services accounted for 5 per cent and on-
site services 95% of the total exports. However,
during 1999-2000 offshore services contributed over
40 percent of the total exports.

The NASSCOM - McKinsey report on
India’s IT sector

According to a recently released NASSCOM-MckKinsey
report, annual revenue projections for India’s IT
industry in 2008 are U.S. $87 billion and market
openings are emerging across four broad sectors; IT
services, software products, IT enabled services, and
e-businesses thus creating a number of opportunities

for Indian companies. In addition to the export mar-
ket, all of these segments have a domestic market
component as well.

Other key findings of this report are:
e Software & Services will contribute over 7.5 % of

the overall GDP growth of India

e IT Exports will account for 35% of the total ex-
ports from India

¢ Potential for 2.2 million jobs in IT by 2008

¢ IT industry will attract Foreign Direct Investment
(FDI) of U.S. $4-5 billion

© Market capitalization of IT shares will be around
U.S. $225 billion

The report projects the sector’s-revenue earnings in
2008 in the following manner:

— US billion)

Sub total
oes lee —

* Legacy/client server, ERP and package work and Internet all have different
proportions of work outside India where revenues are not export revenues.

** Resale of imported products included.

Promotion of IT - governmental incentives:

With the formation of a new ministry for IT, GOI has
taken a major step towards promoting the domestic
industry and achieving the full potential of the In-
dian IT entrepreneurs. Constraints have been com-
prehensively identified and steps taken to overcome
them and also to provide incentives. Thus for ex-
ample, venture capital has been the main source of
finance for software industry around the world.
However, in India majority of the software units is in
the small and medium enterprise sector and there is
a critical shortage of venture capital kind of support.
In order to alleviate this situation and to promote

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