IT & ITeS in India

The Indian Information Technology (IT) and Information Technology enabled Services (ITeS) sectors complement each other in every aspect. The industry has continued to perform its role as the most consistent growth driver for the economy. The industry 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.

Indian firms, across all other sectors, largely depend on the IT & ITeS service providers to make their business processes efficient and streamlined. Indian manufacturing sector has the highest IT spending followed by automotive, chemicals and consumer products industries. The main growth drivers of the IT and ITeS industry are cost efficiencies, skilled manpower, utilisation rates, diversification into new verticals, and shifting business and pricing models.

The Cabinet has recently approved the National Policy on Information Technology 2012. The policy aims to increase revenues of IT and ITeS industry from US$ 100 billion to US$ 300 billion by 2020 and expand exports from US$ 69 billion to US$ 200 billion by 2020. Further, it will help to promote innovation and research and development (R&D) in cutting edge technologies and development of applications and solutions in areas like localisation, location based services, mobile value added services, Cloud Computing, Social Media and Utility models.

The country is also known across the world for its successful export-led software industry. India's information technology and business process outsourcing sector will expand 12-14 per cent in fiscal 2014 to touch US$ 84 billion - US$ 87 billion in exports, according to industry grouping National Association of Software and Services Companies (Nasscom).

Indian corporate, across various industry segments, are installing and accepting IT products and services in a big way to improve their operations throughout the entire organisation. There are estimates that spends over IT services, across the industry segments, will witness quantum jump in the years to come.

The US$ 30 billion domestic IT market is estimated to grow at 15-18 per cent in 2013 on the back of increasing adoption of technology by Indian companies, according to technology advisory firm Zinnov Management Consulting Pvt. Ltd.

The IT platform not only offers opportunities to exploit domestic demand but also facilitates access to the global avenues. Furthermore, investments by enterprises in IT infrastructure, applications and IT outsourcing has been increasing. Indian IT's core competencies and strengths have placed it on the international canvas, attracting investments from major countries. A few of them are as listed below:

• India's inherent IT capabilities - abundant talented workforce and world-class companies
• Development of Tier-I and Tier II/III cities enabled India to offer lower cost of delivery in comparison to other offshore locations
• Development of software technology parks of India (STPI), special economic zones (SEZs), and Information Technology Investment Region (ITIR)
• India's mature capabilities in higher, value-added activities and in the global delivery model
• Core areas such as custom application development and maintenance as priority areas, which are easily offshoreable
• Large service centres of global companies, with R&D capabilities making India an IT hub
• Enhanced global service delivery capabilities of Indian companies
• Government policies and increase in the participation by public-private ventures have also helped in the growth of the IT-BPO sector

(Source: Investment Commission of India)

Further, majority of the Fortune 500 and Global 2000 corporations are sourcing IT/ITES from India and it is the premier destination for the global sourcing of IT & ITES accounting for 55 per cent of the global market in offshore IT services and garnering 35 per cent of the ITES/BPO market.

There is also potential to develop the Electronic System and Design and Manufacturing (ESDM) sector to meet domestic demand as well as to use the capabilities so created to successfully export ESDM products from the country. The National Policy on Electronics 2012 aims to address the issue with the explicit goal of transforming India into a premier ESDM hub.

• In the electronics and IT sector, 100 per cent FDI under the automatic route is allowed in Data processing, software development and computer consultancy services, Software supply services, Business and management consultancy services, Market Research Services, Technical testing & Analysis services
• About 51 software technology parks (STP) centers have been set up as autonomous societies under the Department of Electronics and Information Technology since the start of the programme to promote software exports from the country. STPs enjoy a number of benefits that include exemptions from service tax, excise duty and rebate for payment of Central sales tax. The most important incentive available is 100 per cent exemption from income tax of export profits
• The Cabinet has approved the proposal to provide a special incentive package to promote large-scale manufacturing in the electronic system design and manufacturing (ESDM) sector which is called the Modified Special Incentive Package Scheme (M-SIPS). The scheme provides subsidy for investments in capital expenditure - 20 per cent for investments in SEZs and 25 per cent in non-SEZs. The incentives are also available for investments made in a project within a period of 10 years from the date of approval
• As a part of the National Electronics Policy, the Government of India is planning to set-up 15 new laboratories under public-private-partnership (PPP) model for hardware and software testing. The labs, for which the locations are yet to be decided, will facilitate registration and testing of IT products before they are launched in the market

(Source: Consolidated FDI Policy)