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Published on: Aug. 12, 2022, 1:03 a.m.
How IT has transformed India
  • The cumulative earning of India’s top 5 IT companies have now shot up to around $70 billion

By Ritwik Sinha. Consulting Editor, Business India

Evaluating India’s 75 years of economic journey could also lead to the perception that the country actually became independent on two occasions – freedom from colonial rule in 1947 and the decisive shift to a free-market economy model in 1991. Economic reforms are credited with the gradual unshackling of most sectors, taking them to unimaginable highs. Those who believe this also point to a common thread – the adequate support of a simultaneously growing Information Technology (IT) sector which eased this process for all stakeholders in the value chain.

From the simple computing processes that defined the early 90s to the growing wave of ITeS which made India the back office of the world through BPOs in the following decade to the bedrock of a fast-evolving digital era, the Information Technology sector has been the real differentiator in the emergence of a new India. Recognised as India’s key strength, the sector has simply given the country a new global identity.

IT to India is what manufacturing is to China and in the coming decades, its importance is expected to grow. Facebook founder Mark Zuckerberg recently indicated this when he said India is going to play a huge part in building the metaverse, the ‘next big thing’ in the global technology sphere, aiming to bridge the gap between the real and virtual.

Journey since 1990s

Historians will tell you that the IT industry had existed in a very nascent stage in the decades after independence. When personal computing had begun sweeping the world in the US and elsewhere, especially in the 70s, it also found reflection in the Indian market with a selective group of customers showing a propensity for its adoption, first for personal use and later for official use in the 80s.

The realisation that computers were the future as well as the software systems supporting them in myriads of ways (especially networking) had also dawned on a select group of a new generation of entrepreneurs who had entered the market and stayed there for over a decade.

The opening of the economy and the advent of the internet later in the 1990s opened the doors for big-ticket growth of the IT sector. Indian IT engineers were in demand all across the world where the sector was registering galloping growth and built quite a reputation for India as the hub for IT talent. Lesser-known corporate entities like Infosys, WIPRO, HCL, TCS, etc caught the attention of everyone with their solution offerings.

The people behind such enterprises – Narayana Murthy, Azim Premji, Shiv Nadar, Nandan Nilekanni – became more than exceptionally successful entrepreneurs. They were rather seen as new age icons of a changing society and mascots of Indian IT expertise.     

The sector also got a major boost from a set of supportive policies like the setting up of Software Technology Parks (STP) and it increasingly turned into a magnet for drawing FDI in the late 90s and later. A clutch of states in South India led by Karnataka and Andhra emerged as the major IT hubs with serious fiscal sops and progressive policies.

And sensing their changing profile, other states like Maharashtra and Tamil Nadu soon joined the race with their own promotions of the sector. Several observers underline that in the post-liberalisation era, states vied with each other for a greater share of the IT pie.

  • Supportive policies helped in setting up of Software Technology Parks which turned into a magnet for drawing FDI

This battle for IT supremacy later reached a pinnacle and became the basis for a huge BPO industry around the beginning of the new millennium. And then it supported the first internet-based customer services like retail, payment, etc which later became the entry points for consumer-centric digital applications. The sector, which had a small share of 1.2 per cent of the GDP around the late 90s today has a commanding double-digit share of 10 per cent.     

As per a recent estimate by NASSCOM, the Indian technology industry crossed the $200 billion revenue mark in FY22 reaching $227 billion. It marked an increment of $30 billion over the previous year’s figure with a hefty growth rate of 15.5 per cent – the highest single year growth trajectory in a decade. According to the report, most of the sub-sectors recorded double-digit growth while exports (including hardware) shot up to $178 billion supported by an annual growth rate of over 17 per cent. 

India’s massive digital infrastructure played a key role in driving India’s tech adoption with public digital platforms becoming the bedrock of India’s digital advantage. Propelled by this enhanced domestic demand, the domestic IC revenue of the technology industry recorded a 1.2x growth over FY2019 to reach about $50 billion.

Ecommerce recorded a growth of 39 per cent to reach $79 billion in 2021-22. The report adds that the share of digital revenue share stood at 30-32 per cent, recording an incremental revenue of $13 billion in FY22E.  

The sector has led to the large-scale employment of more than five-million people. And the companies carrying the baton are once again believed to be on a new growth journey (their growth pace had somewhat slackened before Covid). Early this year, six Indian IT companies – TCS, Infosys, Wipro, HCL, Tech Mahindra and LTI – found themselves in the list of the top 25 most valuable global IT services brands.

TCS and Infosys notched second and third slots in the coveted list where Accenture occupied the numero uno position. According to an estimate, the cumulative earning of India’s top 5 IT companies have now shot up to around $70 billion.

More dividend from differentiator

The digitalisation drive, which has been given a hard push by the current government – ranging from a host of smart services in the public domain to increasing digital led transactions between consumers and sellers of all kinds (even street side vendors) – has significantly added to the growth of the IT sector. A process that was decisively expedited when Covid-led restrictions demanded new adjustments.

And this is slated to escalate the basic IT business to new horizons in the current decade which is often referred as a techade. “We are excited about the opportunities in the techade as we enter an era of exponential transformation. Technology has now become indispensable to progress,” Rekha M Menon, Chairperson, NASSCOM recently commented.

  • We are excited about the opportunities in the techade as we enter an era of exponential transformation. Technology has now become indispensable to progress

    Rekha M Menon, Chairperson, NASSCOM

The Indian IT industry as it stands today, has nearly half-a-dozen segments – services, BPM, ER&D, hardware, software products and e-commerce. And based on its strengths in these respective segments (hardware is the last sector where India is keen to make a mark with its Atmanirbhar programme), the country is looking to develop a digital economy of $1 trillion by 2025.

On the exports front too, India has a similar $1 trillion target by the same date with the government expecting a major push from IT exports which already account for half of India’s services exports. Speaking at the World Economic Forum earlier this year, Commerce and Industry Minister Piyush Goyal said that India can reach $1 trillion of services exports by 2030. And an optimism of this kind is obviously rooted in the IT exports from India heading for new heights.

Analysts and research reports cite a host of factors which will propel the growth of the IT sector in the techade at a brisk pace. The digital services’ ambit will further expand (even telecom companies have begun calling themselves digital service providers) with the growing adoption of artificial intelligence, cloud computing, big data analytics, blockchain and the Internet of Things (IoT).

The rollout of 5G in the next few months will give a further boost to this drive. In the near to medium run, the industry is projected to maintain a growth trajectory of 11-14 per cent and touch an annual revenue of $350 billion by FY26. Things remaining normal, the decks once again seem to be clear for the Indian IT industry to aim at new milestones.

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