IT looks inward

Now, it's the domestic market that's powering the sector

India's information technology (IT) services industry has traditionally been dominated by exports - but, in the last couple of years, it is the domestic scene which has begun to matter. Exports in the coming financial year (2015-16) have been projected by industry association Nasscom to grow at 12-14 per cent; 13.1 per cent is likely to be achieved in the current year. But the domestic industry is projected to grow by 15-17 per cent, on top of the current year's likely growth of 14 per cent. On the face of it, the domestic market has gone up by 50 per cent to $48 billion (approximately Rs 3 lakh crore at the current exchange rate) in 2014-15; but this is because under the earlier system of computation, $10 billion of e-commerce revenue was not captured in the 2013-14 figure. The result of all this is that, from accounting for 73 per cent of IT in 2013-14, exports will be down to 67 per cent in the coming year (2015-16). The domestic IT sector is also getting a big boost with the Centre's focus on e-enabling of government.

The dual boost to the domestic IT sector is well timed. A start-up and product ecosystem is rapidly growing in the country. There are now over 3,000 start-ups in India; only three other countries have more. The product engineering solutions business is currently growing at the fastest rate among all IT services segments. Thus, on the one hand, the domestic IT market is getting traditional business from greater focus on e-governance and, on the other, the investment in innovation, as captured in the burgeoning number of start-ups, is being funded well from abroad. This boost to the domestic sector could change the face of Indian IT in a critical way - from doing only routine jobs for others to devising solutions whose intellectual property rests with the domestic creators. The outward manifestation of this is the proliferation of mobile phone apps.

Substantial technological upgrade is also underway in the traditional core of the Indian IT industry. The leading players are increasingly employing automation to raise productivity. Infosys has just acquired a global provider of automation technology. Along with this, work in delivering to clients across the world the digital way of doing business ("SMAC", or social, mobility, analytics and cloud) is rapidly growing. Digital business now contributes 12-14 per cent of industry revenue. As a result of all this, the IT industry is back to creating more new jobs every year. After a dip in new jobs last year, the industry will add 2,30,000 jobs in the current year. At 10 per cent plus topline growth in dollar terms, the industry is likely to rapidly increase its share of Indian GDP from the already impressive nine per cent in the next few years.