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GST Software Industry - Overview of array of activities carried out by software industries

Background of IT sector in India

Information Technology (IT) industry in India is one of the fastest growing industries. Indian IT industry has built up valuable brand equity for itself in the global markets. IT industry in India comprises of software industry, information technology enabled services (ITES), and business process outsourcing (BPO) industry. India is considered as a pioneer in software development and a favorite destination for IT-enabled services. The IT / BPO / software industry in India has today become a growth engine for the economy, contributing substantially to increase in GDP, urban employment and exports and to achieve the vision of a “young and resilient” India.

Present scenario

Indian economy is booming rapidly due to fast growth of Indian Information Technology sector. According to the NASSCOM-Deloitte study, the IT/ITES industry's contribution to the country's GDP has increased to a share of 5.2 per cent in 2007, as against 1.2 per cent in 1998.

In an increasingly globalised world, significant complexity and uncertainty is getting attached to this unprecedented economic crisis. The Indian economy has also been impacted by the recessionary trends, with a slowdown in GDP growth to six per cent.

Performance of IT-BPO industry

The Indian IT-BPO industry is expected to achieve revenues of USD 71.7 billion in FY2009, with the IT software and services industry accounting for USD 60 billion of revenues. During this period, direct employment is expected to reach nearly 2.23 million, an addition of 226,000 employees, while indirect job creation is estimated to touch 8 million. In FY 1998, the contribution of IT sector to GDP was just 1.2 %, which is now expected to climb upto 5.8 % in FY 2009. Net value-added by this sector, to the economy, is expected to be at 3.5-4.1 per cent for FY2009. The sector’s share of total Indian exports (merchandise plus services) has increased from less than 4 per cent in 1998 to almost 16 percent in 2008.

Exports market: The revenues from export of IT services are expected to cross USD 47.3 billion in FY2009, thus accounting for 66 percent of the total IT-BPO industry revenues.

Domestic market: Domestic IT-BPO revenues are expected to grow at almost 20 per cent to reach INR 1,113 billion in FY2009. The domestic BPO segment achieved growth of 40 percent during FY2008, and revenues of INR 88.7 million. The growth of IT sector in domestic market will be driven by millions of SME’s, apart from large / mid sized companies.

Challenges faced by software industry in recent times

The growth in IT sector is not seeing buoyancy now as compared to earlier years due to global economic crisis. The global crisis in the financial sector has highly affected Indian IT firms. Software exports grew from mere $ 50 million in 1991 to $ 40 billion in 2008, with compounded growth rate of 30 % over last three years. But due to economic meltdown, this growth is now reduced to 20 %.

Strengths of software industry

Invention of new technology is the need of hour and India has got the upper hand due to large number of software professional and experts. The potential of the youth needs to be harnessed to accelerate the economic growth rate by providing a suitable economic and tax environment.

Future outlook

The future of IT industry will depend on cost and availability of skilled man power. The focus on cost reduction is bound to increase, in view of the current recessionary environment.

Access to talent is likely to become more decisive as workforce demographics indicate a shortfall in the long term, in all major developed countries such as USA, UK, France, etc and some developing countries as well.

All the above reasons are bound to fuel global technology related spending on sourcing and Indian software / IT industry is bound to gain a large share out of international business pie. The industry anticipates that it can achieve an export target of USD 60-62 billion by FY 2011, employing 2.5-3 million professionals directly and contributing substantially to the socio-economic development of the country.


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