Information and Communication Technology (ICT) in India

The rapid emergence of the Information and Communication Technology (ICT) sector has placed India on the global stage during the last one and a half decades. The sector has acted as a catalyst for growth across the Indian economy, including areas such as real estate, automobiles, travel and tourism, railway and mortgage banking industries. Employing over 2.5 million people directly, and over eight million indirectly through the sector, the ICT industry is rapidly expanding across all domains, primarily driven by software services.

With more attractive and investor-friendly Foreign Direct Investment (FDI) policies, India has become one of the favourite destinations for ICT investment portfolios. The introduction of liberalized foreign direct investment policies by the Indian government allows 100 per cent investment in the Indian ICT sector. The Government has initiated numerous measures to facilitate licensing, thereby making investment procedures easier.

The revenue aggregate of Indian IT-BPO industry is expected to grow by 19.2 per cent and reach US$ 88.1 billion by the end of FY 2010-11 as compared to US$ 73.9 billion in FY 2009-10. The total FDI inflow for the ICT sector during April 2010-March 2011 was US$ 665 million as stated in a report by NASSCOM.

The mainstay of the sector was governed by Exports which accounted for revenue of US$ 59 billion, growing at 18.7 per cent during 2009-2010. The Domestic market grew at 16 per cent, aggregating US$ 17 billion during the same period as stated in the report by NASSCOM. This increase in the domestic market revenues was a direct result of the efforts made by the Central and State Governments, Corporate, and Small / Medium Businesses to adopt modern technology for enhancing citizen services and better control management.

To create investor friendly opportunities, the Indian Ministry of IT in the Annual report, 2010-11 stated that the Government has decided to set up a transparent investment policy. Information Technology Investment Regions (ITIRs) offering superior infrastructure and friendly policy environment will be set up across the country. Under the new policies, all Indian States / Union Territories can set up integrated townships for facilitating growth of IT/ BPO and Sunrise Industries with world class infrastructure.

Karnataka, Andhra Pradesh, Orissa and Tamil Nadu are the first four states to take the initiatives in sending proposals to the Government for setting up IT Township Facilities.

The Bengaluru-BIAL ITIR is spread in 12,000 acres and is one of the largest investment opportunities in the State of Karnataka at a total cost of US$22 billion. Karnataka is offering all the infrastructure facilities and over 55 MNC's have signed Memorandum of Understanding (MOUs) for the same. The Andhra Pradesh Government is all set to promote an Information Technology Investment Region (ITIR) in an extent of 50,000 acres that would asisst in increasing the State IT exports to the tune of US$ 52 billion and also increase the tax revenue by US$ 6.65 billion.

FDI up to 100 per cent is allowed for the following activities in the Indian Telecom Sector:

• ISPs not providing gateways (both for satellite and submarine cables);
• Infrastructure Providers providing Dark Fiber
• Electronic Mail; and
• Voice Mail

The above would be subject to the following conditions:

• FDI up to 100 per cent is allowed subject to the condition that such companies would divest 26 per cent of their equity in favour of Indian public in 5 years, if these companies are listed in other parts of the world.
• The above services would be subject to licensing and security requirements, wherever required.
• In basic, cellular, value added services and global mobile personal communications by satellite, FDI is limited to 49 per cent subject to licensing and security requirements and adherence by the companies (who are investing and the companies in which investment is being made) to the license conditions for foreign equity cap and lock- in period for transfer and addition of equity and other license provisions.
• ISPs with gateways, radio-paging and end-to-end bandwidth, FDI is permitted up to 74 per cent with FDI, beyond 49 per cent requiring Government approval. These services would be subject to licensing and security requirements.

Source: Consolidated FDI Policy, Department of Industrial Policy & Promotion (DIPP)