Trends of IT Industry in Indian Economy – An Analysis

N.Swapna1 & N.Sujatha2
1

Dept. of Economics, Telangana University, NZB & Dept.of Economics, Osmania University, Hyderabad, India
2
Dept.of Economics, Osmania University, Hyderabad, India
E-mail : Swapanjali111@gmail.com1

Abstract - The Indian Information Technology and Information Technology Enabled Services (IT-ITES) industry has been contributing its role in the economic development of India since post liberalization era. The pace growth of this industry is considered as a growth driver for the economy. India has become as “IT Super Power”. The performance of IT industry can be revealed with the evidence of its contribution to the GDP (Gross Domestic Product) of the country, provision of employment opportunities all over the country, IT services and software exports and revenue to the country. This paper examines how does the IT industry is playing its predominant role in Indian economy with its various trends in the contribution to the GDP of India , IT exports, IT revenue trends and employment opportunities.
Keywords - IT-ITES, Contribution to GDP, Employment, Exports and Revenue.

I.

utilities and services for globally oriented businesses.
The SEZ Act 2005 envisages key role for the State
Governments in Export Promotion and creation of related infrastructure. A few salient features of SEZ scheme are as under:

INTRODUCTION

The Government of India has identified IT industry as one of the major industries in India and it plays an important role in achieving the policy objectives like economic development. Top companies like Microsoft,
IBM, Motorola Oracle, Dell, Nokia, Google, Sathyam,
Infosis and Wipro set up their operations. Information
Technology has made the information access at gigabit speed. Internet services have made the revolutionary changes in all the daily activities like e-filling income tax returns, e-seva, applying for passports and ticket bookings ect. Hence, it is impossible to look at the country without the services of Information Technology.
So, in 2005, the Ministry of Commerce, Government of
India has enacted the Special Economic Zone (SEZ)
Act, with an objective of providing the competitive environment for exports. A SEZ is defined as a
"specifically demarked duty-free enclave and shall deemed to be foreign territory (out of Customs jurisdiction) for the purpose of trade operations and duties and tariffs". The SEZ Act, 2005, supported by
SEZ Rules, came into effect on 10th February, 2006. It provides drastic simplification of procedures and a single window clearance policy on matters relating to central and state governments. In SEZ Scheme the exemption from income tax is tapered down over 15 years from the date of commencement of manufacture.
There is 100% exemption of export profits from income tax for the first five years, 50% for the next five The
SEZ policy aims at creating competitive, convenient and integrated Zones offering World class infrastructure,

Special Economic Zones (SEZs) are being set up to enable hassle free manufacturing and trading for export purposes. Sales from Domestic Tariff Area (DTA) to SEZs are being treated as physical export. This entitles domestic suppliers to Drawback/ DEPB benefits, CST exemption and Service Tax exemption. 100% Income
Tax exemption on export profits available to SEZ units for 5 years, 50% for next 5 years and 50% of ploughed back profits for 5 years thereafter. 1 http://www.sezindia.nic.in/ (External website that opens in a new window)
II. OBJECTIVES:
2.1 To analyze the trends of contribution of IT industry in the total GDP.
2.2 To know the revenue trends of IT industry in the total revenue.
2.3 To know the exports of software and software services. 2.4 To reveal the employment level of IT industry of
India.

Special Issue of International Journal of Computer Science & Informatics (IJCSI), ISSN (PRINT) : 2231–5292, Vol.- II, Issue-1, 2

196

Trends of IT Industry in Indian Economy – an Analysis

ITeS revenue of Indian Software and Services industry have contributed from 74.5 % in 2001-02 to 78.9% in
2008-09. They are estimated as US $ 7.6 billion to US
$46.3 billion in 2008-09 with a CGAR of 28.6%. The contribution of ITES-BPO exports has increased from
US $ 1.5 billion in 2001-02 to US $ 12.7 billion in
2008-09 a CGAR about 39.2 per cent. BPO now accounts about 27 per cent of total exports. However, the fastest growing segment is software products. It is growing at a CGAR of 48.5 percent.

III. CONTRIBUTION TO GDP:
IT industry is contributing Rs.63 billion in 1994-95 in the GDP of India and it has increased to as
Rs.1276 billion in 2004-05. the contribution in the various years is given below.
Contribution of IT sector to India’s GDP
Table. 1 year GDP at current prices (in
Rs. Billion)

IT sector revenue (in Rs.
Billion)

1994-95

10128

63

IT revenue to GDP ratio ( in
% age)
0.62

1995-96

11880

99

0.83

1996-97

13682

137

1.00

1997-98

15224

186

1.22

1998-99

17409

253

1.45

1999-2000

19296

362

1.88

2000-01

21043

566

2.69

2001-02

22929

658

2.87

2002-03

24661

780

3.16

2003-04

26954

978

3.63

2004-05

29380

1276

4.34

Segment wise exports Revenue Trends in IT-ITeS
Industry
Table. 3
Year/
Item

2001
- 02

2002
- 03

2003
- 04

2004
- 05

2005
- 06

2006
- 07

2007
- 08

2008
- 09

CAG
R

IT Service

5.8

5.5

7 .3

10.0

13.3

17.8

23.1

26.5

23.2

ITeS-BPO

1.5

2.5

3 .1

4.6

6 .3

8.4

10.9

12.7

39.2

Software
P roducts,
Engineeri
ng
Services
Total ITITeS

0.3

1.5

2 .5

3.1

4 .0

4.9

6.4

7.1

48.5

7.6

9.5

12.9

17.7

23.6

31.1

40.4

46.3

28.6

Source: Nasscom
VI. DOMESTIC MARKET :
The domestic market is also significant in the contribution of total revenue of IT industry. The revenue from the domestic software & services market is estimated to have grown from US $ 2.6 billion in 200102 to US $ 12.4 billion in 2008-09 with a CGAR of about 22.2 per cent. The sector of software products and engineering services is dominating in its domestic revenue, but its share however, is declining from US $
0.4 billion in 2001-02 to US $ 202 billion in 2008-09.

Source: http://mospi.nic.in and http://www.nasscom.org
Note: GDP figures are at market prices.
IV. REVENUE :
The IT-ITeS industry has been growing at a outstanding pace since 2001-02. The total IT-ITeS exports and domestic industry revenue is estimated as
US $ 10.2 billion in 2001-02. It has reached to US $
58.7 billion in 2008-09, the CAGR of about 26.9 per cent. Segment wise Domestic Revenue Trends in IT-ITeS
Industry

Table. 2
Year/ 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008Item
02
03
04
05
06
07
08
09
7.6
9.5
12.9 17.7 23.6 31.1 40.4 46.3
IT-ITeS
Exports
2.6
3.0
3.8
4 .8
6 .7
8 .2
11.7 12.4
IT-ITeS
Domestic
10.2 12.5 16.7 22.5 30.3 39.3 52.0 58.7
Total
(US
$billion)

Table. 4
CAGR
(%)
28.6

Year/
Item
IT
Service
ITeSBPO
Software
Products,
Engineer
ing
Services
Total ITITeS

22.2
26.9

Source:http://www.nasscom.org
V. EXPORTS :
The exports of IT industry have grown year by year since 2001. The share of IT-ITeS exports to total IT-

2001 2002 2003 2004 2005 2006 2007 2008 CA
- 02 - 03 - 04 - 05 - 06 - 07 - 08 - 09 GR
2.1 2.4 3.1 3.5 4.5 5.5 7.9 8.3 19.5
0.1

0.2

0.3

0.6

0.9

1.1

1.6

1.9

44.5

0.4

0.4

0.4

0.7

1.3

1.6

2.2

2.2

23.7

2.6

3.0

3.8

4.8

6.7

8.2

11.7 12.4 22.2

Source: Nasscom

Special Issue of International Journal of Computer Science & Informatics (IJCSI), ISSN (PRINT) : 2231–5292, Vol.- II, Issue-1, 2

197

Trends of IT Industry in Indian Economy – an Analysis

Process Outsourcing (BPO) and other. IT industry is spreading its services in various sectors as airline information, insurance, banking sector and mortagage companies. VII. EXPORT DESTINATIONS :
USA and UK are the major markets for the IT and software exports. The share of USA has declined from
68.3 per cent in Financial Year 2005 to 60 percent in
Financial Year 2008. Whereas Europe has increased from the same period. The markets across the Asia
Pasific Countries are also growing year-on-year growth as 8.60 in the Financial Year2005 to 9 per cent in
Financial Year 2008.

REFERENCES
[1]

Chandraashekar S. and Basvarajappa K.P.
‘Technological Innovation and economic development: Choices challenges for India”,
Economic and Political Weekly , August 25,
2001.

[2]

Hagel J & Seely Brown “ Your Next IT
Strategy”, Harvard Business Riview, October,
2001.

[3]

Krishna S. Abhoy K Ojha and Mechael Barett, “
The Global Competitive Advantage of the Indian
Software Industry”, C Avgerou and G Walsham
(eds), Information Technology in context: studies from the perspective of developing countries,
Ashgate – London.

[4]

Kumar, Nagesh and Joseph (2004); “ National
Innovation system and India, IT Capability; are there any lessons for asean New Comers?”
Discussion paper No. 72/2004, research and
Information system for the non aligned and other developing countries, New Delhi, April.

[5]

Tschang, T., (2001): The Basic characteristics of skills and organization capabilities in the Indian
Software Industry, working paper no. 13.

Table. 5
Market

FY05

FY06

FY07

FY08

FY05

Americas 68.30% 67.18% 61.40% 60% 68.30%
Europe 23.10% 25.13% 30.10% 31% 23.10%
(incl. UK)
Rest of the 8.60% 7.69% 8.50% 9% 8.60%
World
(incl.
APC)
Source: Nasscom
VIII. EMPLOYMENT :
Table. 6
Year/ Item 2001
- 02
IT Services 0.17
& Exports
0.11
BPO
Exports
Domestic 0.25
Market
0.52
Total
Employme nt 2002 2003 2004 2005 2006 2007 2008
- 03 - 04 - 05 - 06 - 07 - 08 - 09
0.21 0.30 0.39 0.51 0.69 0.86 0.92
0.18 0.22 0.32 0.42 0.55 0.70 0.79
0.29 0.32 0.35 0.38 0.38 0.45 0.50

REPORTS:

0.67 0.83 1.06 1.29 1.62 2.01 2.21

[1]

Electronic Governance – A Key issue in the 21st
Century”,
Electronic Governance Division,
Ministry of Information Technology, Govt. of
India, New Delhi, 2002.

[2]

Electronic Governance Division, Ministry of
Information Technology, Govt. of India, New
Delhi, 2009

[3]

The software industry in India: A Strategic review 1997-98, NASSCOM, New Delhi, India
1999.

[4]

NASSCOM – Mckiney
NASSCOM, July, 2000.

[5]

Budget 1997-98: An Analysis of impact on computer software industry”, NASSCOM, New
Delhi, India, 1997.

Source: Nasscom
The total IT Software and Services employment was estimated as 2.20 million in the year 2008-09 and it was only 0.52 million in the year 2001-02. The direct employment contribution in the estimated employment is about to 8.0 million in 2008-09. This translates to the creation of about 10.20 million job opportunities attributed to the growth of the sector.
IX. CONCLUSION:
Indian IT industry is one of the key industries to contribute its significance in the growth variables of
GDP of India, exports, revenue and employment. India’s
IT software and services exports have been rising rapidly. The annual growth rates range between 20-2022% in IT services and near about 55% in IT, IT enabled services (ITES) such as call centers, Business

report

–

2000”,

Special Issue of International Journal of Computer Science & Informatics (IJCSI), ISSN (PRINT) : 2231–5292, Vol.- II, Issue-1, 2

198