India’s IT-BPM sector
India is the world’s largest sourcing destination, accounting for approximately 55 percent of the US$ 185-190 billion markets in 2017-18. India’s highly qualified talent pool of technical graduates is one of the largest in the world and the country has a low-cost advantage by being 5-6 times inexpensive than the US. India is the second-fastest digitizing economy amongst 17 leading economies of the world. The cloud market in India is expected to grow three-fold to Rs 49,621 crore (US$ 7.1 billion) by 2022 with the help of Growing adoption of Big Data, analytics, artificial intelligence, and the Internet of Things (IoT), according to Cloud Next Wave of Growth in India report. India’s IT industry contributed around 7.7 percent to the country’s GDP and is expected to contribute 10 percent of India’s GDP by 2025. The IT-BPM sector in India stood at US$177 billion in 2019 witnessing a growth of 6.1 percent year-on-year and is estimated that the size of the industry will grow to US$ 350 billion by 2025. Moreover, revenue from the digital segment is expected to form 38 percent of the total industry revenue by 2025 whereas, the digital economy is estimated to reach Rs 69,89,000 crore (US$ 1 trillion) by 2025. The total export revenue of the industry is expected to grow 8.3 percent year-on-year to US$ 136 billion in FY19. Spending on Information Technology in India was estimated to be around US$ 90 billion in 2019. IT industry employs nearly 3.97 million people in India of which 105,000 were added in FY18.the industry has added over 0.873 million jobs over last five years itself. The export sector crossed Rs 9,57,493 crore (US$ 137 billion) of revenues and marginally grew at the rate of 7-9 percent in FY19.
IT industry employs nearly 3.97 million people in India of which 105,000 were added in FY18.the industry has added over 0.873 million jobs over last five years itself. The export sector crossed Rs 9,57,493 crore (US$ 137 billion) of revenues and marginally grew at the rate of 7-9 percent in FY19. The computer software and hardware sector in India attracted cumulative Foreign Direct Investment (FDI) inflows worth US$ 43.58 billion between April 2000 and December 2019 and ranks second in the inflow of FDI, as per data released by the Department for Promotion of Industry and Internal Trade (DPIIT). PE investments in the sector stood at US$ 11.8 billion across 493 deals in 2019. Venture Capital (VC) investments in the IT & ITeS sector stood at US$ 67.0 million during Q3 2019. The Government of India has extended tax holidays to the IT sector for software technology parks of India (STPI) and Special Economic Zones (SEZs). As of November 2019, there were 417 approved SEZs across the country where 274 are of IT & ITeS and 143 are exporting SEZs. Further, the country is providing procedural ease and single window clearance for setting up facilities. In May 2019, the Ministry of Electronics and Information Technology (MeitY) launched the MeitY Startup Hub (MSH) portal. Also, the government has identified information technology as one of the 12 champion service sectors for which an action plan is being developed. It is setting up a Rs 5,000 crore (US$ 745.82 million) fund for realizing the potential of these champion service sectors
COVID-19: IT industry comes to a standstill
The first quarter of the year has been inauspicious for the economy with the rest of the year only appearing even more catastrophic. The COVID -19 pandemic has created havoc in almost every country, business sector, and human behaviour, giving rise to a situation no less than a global war or an economic recession. From significant researches, it could be inferred that the Indian IT industry whose size is as big as USD 181 billion is going to witness a significant slowdown during the financial year. Lockdown leads to revenue meltdown: the technology spending in many regions like the US and Europe is going to affect the revenue of top IT companies.
According to some estimates, the global IT industry is expected to see an overall decline of about 3-4% due to the pandemic. This slowdown in the IT expenditure across the globe might lead to a loss of billions of dollars to India’s IT industry, according to some rough estimates the loss is expected to be around USD 5 Bn in IT services export. The hardware business is expected to be more affected than the software and services business. The travel restriction imposed around the country to control the spread of the virus is leading to delayed project execution.
The closure of air travel and road travel has led to the cancellation of projects which were going to be finalized soon, not just old projects, procurement of new projects is also affected. The travel restrictions have also taken a hit on the execution of the ongoing projects in the firms. The concept of work from home is still a new one for the Indian techies even and they are adapting and trying to cope up with the difficulties it places in front of the IT workers. Continuous efforts are made by the firms to engage with their clients on a digital platform. They are also trying to ensure that their workforce is adapted to the new work from home concept.
This slowdown is causing massive layoff and pay cuts, some estimates tell us that approximately 2 lakh employees of India’s IT industry might lose their jobs. The smaller IT firms are going to be even worse affected than the big giants. The statistics reveal that the smaller firms’ employs around 1-1.2 Million people while the top 5 giants’ employees around 1 million people. The total employment provided by the IT industry is close to around 4.5 Million. The present situation, however, is full of ambiguity. And with alarming projections showing what it may cost the world in the long run, it needs to be seen how India’s IT industry is going to survive and evolve amidst this crisis.
Shubham Mahla: A B.Tech graduate who is currently pursuing his MBA from Institute of Management, Nirma University is associated with J.Hirani as an intern. His keen inclination towards Finance and passion for learning has persuaded him to explore the field with excellent work in research and application tools. His contribution in this article has helped him to develop holistic deep insights.
Parth Hirani is a leading strategic advisory practice at J.Hirani & has helped various organizations align strategies across continents. A social & collaborative sapien by nature. He enjoys being a full time “dreamer” & loves challenging “possibilities”.
Success mantra- “We believe it’s possible; while maintaining flexibility on “How” we are “Rigid” on our “Goals”
About J.hirani: J.hirani is a Strategic Transformation team which works as a growth partner for different organisations in various industries by providing services like Agile transformation, Scenario mapping, Strategic alignment, Balance scorecard, Digital transformation, Incubating new ventures, Operation excellence and Aligning human capital.
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