Competition to India's information technology and IT-enabled services (ITeS) companies from other cost-effective nations and protectionist moves of some key markets like the U.S. have caught the attention of the government. As a result, the government is not only changing its strategy to stay competitive globally but also taking initiatives to promote growth of the sector by increasing IT adoption within the country.
“Some of the challenges faced by the IT and ITeS sector include increasing competition from other countries with incentivised low costs, rising cost in India with wage-push inflation, increasing costs of relevant talent and skilled personnel, infrastructure constraints with over 90 per cent of risks like currency fluctuations and security, both physical and data related, and rising protectionists sentiments in key markets,” the Economic Survey 2011-12 said.
As per industry estimates, India's IT and BPO sector (excluding hardware) revenues were $87.6 billion in 2011-2012 (a growth of 14.8 per cent) – $68.7 billion exports and $19 billion domestic, while it generated direct employment for nearly 2.8 million people and indirect for around 8.9 million people.
As a proportion of national GDP, IT and ITeS sector revenues have grown from 1.2 per cent in 1997-98 to around 7.5 per cent in 2011-12.
“Consistent demand from the U.S., which increased its share from 61.5 per cent to 62 per cent, characterised 2011-12. Emerging markets of the Asia Pacific and the rest of the world also contributed to overall growth,” the Survey pointed out.
Referring to future strategy for the sector, the Survey said the government had been a key catalyst for increased IT adoption – through sector reforms that encouraged IT acceptance, National e-Governance Plan (NeGP), and the Unique Identification Development Authority of India (UIDAI) programme that created large-scale IT infrastructure and promoted corporate participation.
Talking about electronics hardware production, the Survey said it was expected to grow by 27.6 per cent in 2011-12 and cross Rs.1.55-lakh crore ($33 billion). Electronics hardware exports is expected to grow by 12.8 per cent and cross Rs.47,090 crore ($10 billion) in 2011-12 as against Rs.41,721 core ($8.86 billion) in 2010-11. In its recently released draft, the National Policy on Electronics (NPE), the government projected that the electronics system design and manufacturing industry was likely to reach a turnover of $400 billion by 2020, involving investment of about $100 billion, besides creating 28 million jobs.
