Restrictions hurting our operations in China, IT industry tells Goyal

The growth of Indian IT companies in China has been crippled by market access restrictions and non-tariff barriers, even after a decade of operations, the industry has informed the government.

Despite the Chinese IT services market remaining the third largest globally, investments by the Indian industry have not been able to grow owing to unique challenges faced while setting up shop, the firms said.

Top executives from TCS, HCL, Infosys, Tech Mahindra, Wipro and others, led by the National Association of Software and Services Companies (Nasscom), attended the meet on Thursday with Commerce and Industry Minister Piyush Goyal.

The top five — TCS, Wipro, Infosys, Tech Mahindra and HCL — have been operating in China for over a decade. Locals make up 90 per cent of their staff count in China. However, the returns have been minimal and, therefore, the motivation to invest and expand operations in China has remained low, the government was told.

Goyal has directed the firms to share specific data regarding non-tariff barriers and has assured them of all support including direct engagement with China, Japan and South Korea.

In January, an artificial intelligence-enabled platform named SiDCOP was launched to address the language problem and serve as a matchmaking engine. At present, more than 80 Indian and 40 Chinese firms have registered on the platform.

However, the government has pushed the IT industry to explore new market opportunities in existing markets such as the US, which is the recipient of two-thirds of all IT exports.

The government has flagged new markets such as the Nordic countries, eastern and central Europe, Canada, Australia, and Africa. For the high-potential markets of east Asia, China, Japan and South Korea, language remains a major hurdle.

The companies have sought a grant or reimbursement of up to $4,000 for each individual for language training. According to the proposal, once an employee gains business proficiency, the fund could be transferred to their employer, said a person in the know.

However, the government has refused, with the minister urging the top five firms to create a corpus themselves.

India is the largest exporter of IT services and exports constitute 79 per cent of the total revenue of the industry.

The sector contributed 7.7 per cent to the GDP in FY17 and is expected to contribute up to 10 per cent by 2025. According to Nasscom, the sector aggregated revenues of $160 billion in 2017. The US accounts for two-thirds of the country’s IT services exports.

The IT and ITeS industry grew to $181 billion in FY19. Exports from the industry increased to $137 billion in FY19, while domestic revenues (including hardware) advanced to $44 billion.