IT Sector Rides On Cloud Nine
Dalal Street Investment Journal|Vol. 36. No. 22 • SEPT 27 - OCT 10, 2021
The technology industry in India is popular for its cutting-edge innovation and global success. And the fact that it has taken great strides with footprints across the globe has become more than evident from its unending success streak despite the pandemic and the negative effects of the lockdowns. As of now, the sector is on a huge recruitment drive, indicating better days ahead

India is a leading sourcing destination across the world, accounting for approximately 55 per cent market share of the USD 200-250 billion global services’ sourcing business in 2019-20. The IT industry accounted for 8 per cent of India’s GDP in 2020. Gradually, India is emerging as the hub for ‘digital skills’. Within the private sector, the IT industry is known to be the largest employer. In FY20, the industry employed over 4 million persons directly. Further, each job in the technology sector had a multiplier effect, leading to the creation of 2.5 indirect jobs in the adjacent sectors. In fact, India is transforming into a digital economy with over 750 million internet subscribers, only second to China.

Due to the lockdown restrictions, the IT and BPM sectors rapidly adapted to a remote work culture. During the global pandemic, the hiring inclination came with the benefits of work from home for more than 2 million IT professionals working remotely. In the global sourcing market, India’s cost-competitiveness in providing IT services, which is approximately 3-4 times more cost-effective than the US, continues to be its unique characteristic. Besides, the National Optical Fibre Network (NOFN) bears a focus to connect all 250,000 village councils in the country with high-speed broadband.

Market Size

On a global basis, estimation of revenue of the IT and BPM sectors is approximately USD 194 billion in FY21, which accounts for an increase of 2.3 per cent on a YoY basis. On a domestic basis, the revenue of the IT industry is estimated at USD 45 billion and export revenue is estimated at USD 150 billion in FY21. IT spending in India is estimated to reach USD 93 billion in 2021 indicating 7.3 per cent YoY growth whereas it will increase to USD 98.5 billion in 2022. If we look at the employment numbers in the IT industry of FY21, the BPM sector in India currently employs more than 1.4 million people while IT and BPM together have more than 4.5 million workers. On the other hand, the Indian software product industry is predicted to reach USD 100 billion by 2025.

The data annotation market in India stood at approximately USD 250 million in FY20, of which the US market contributed around 60 per cent to the overall value. The market is expected to reach approximately USD 7 billion by 2030 on the back of accelerated domestic demand for artificial intelligence (AI). The factor that has attracted significant investment from major countries is Indian IT’s core competencies and strengths. To look at the numbers, the computer software and hardware sector in India pulled cumulative foreign direct investment (FDI) inflows worth USD 71.05 billion in the period April 2000 to March 2021. The sector held a second position in FDI inflows as per the data released by Department for Promotion of Industry and Internal Trade (DPIIT).

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