Economic Growth of Information Technology Industry in India

Transcription

1 Economic Growth of Information Technology Industry in India M.Uma Research Scholar A.P.S.A.College, Thiruppathur , Tamil Nadu Dr.V.Elangovan Associate Professor Abstract Owing to its easy accessibility and the availability of wide range of IT products, the demand for IT services has increased substantially over the years. The IT sector has emerged as a major global source of employment, revenue, growth and better standard of living.it sector accounts for almost 1.2% of India s GDP in 1997 and it has increased to 4.8% in and further increased to 6.9% during 2011.The Indian software and services export revenue reached to a level of $49.7billion in year The export of IT services are estimated to US$25.8billion in showing a growth of 5.8%.The IT-BPO sector in India had an aggregate revenue of US$100billion in FY2012. The export and domestic revenue of the sector stood at US$ 69.1billion and US$ 31.7 billion respectively. (Joy deeb).the IT industry provided employment directly or indirectly for over 2.3million people in 2001.It has been estimated that in the FY2012 the IT industry provided direct employment to 2.8million and indirect employment to 88.9million people all over the country (Joy deeb). The present study applied simple linear trend model to measure the trend in the production and exports of IT industry.the analysis has shown that there are positive trends in the production and export of IT industry. The IT industry s domestic production has been forecasted to USD 31.3 billion from USD 19 billion in the year IT exports from India has been forecasted to USD billion for the year 2020 from its 2013 level of USD 86 billion. The total revenue of IT industry has been forecasted to USD billion for the year 2020 from USD 105 billion during The IT sector is intimately linked to other relevant sectors like biomedical technology, defence and infrastructure. The Indian IT industry has not been utilised up to its potential. If it is applied to Agriculture, Education and in all spheres of human life it can uplift and redeem him from the clutches of poverty and make him to live a convenient and a descent life. In this line of development the IT industry can contribute a lot. ISBN no Page 407

2 Introduction India's IT Services industry was born in Mumbai in 1967 with the establishment of Tata Group in partnership with Burroughs.The first software export zone SEEPZ (Santacruz Electronics Exports Processing Zone)was set up in Mumbai in 1973 and it was the beginning of the modern IT Park. More than 80 percent of the country's software exports happened out of SEEPZ, Mumbai in 1980s. The period of 21 st century is often regarded as a period of information technology and is now changing our life style and social consciousness dynamically.information technology industry is one of the fastest growing, knowledge and skill intensive industry in India. India s IT potential is on a steady march towards global competitiveness, improving defense capabilities and meeting up energy and environment challenges amongst others. The sector has increased its contribution to India's GDP from 1.2% in 1998 to 7.5% in According to NASSCOM, the IT sector s aggregated revenues is US$100 billion in 2012, Export and domestic revenue stood at US$69.1 billion and US$31.7 billion respectively, growing by over 9%. Indian economy is almost grown up tenfold in the previous decade. Over the last 5 years, the domestic software has grown by 62%. The sector has an employment of 3.13 million by2014. The IT&ITES industry in India has today become a growth engine for the economy, contributing substantially to the increase in the GDP, urban employment and export to achieve the vision of a powerful and resilient India.India is the world s largest sourcing destination for the information technology (IT) industry, The Indian IT infrastructure market is projected to grow by 9.7 per cent y-o-y to reach US$ 2.1 billion in The IT-BPM sector in India grew at a compound annual growth rate (CAGR) of 25 per cent over , which is 3-4 times higher than the global IT-BPM spend, and is estimated to expand at a CAGR(Compound Annual Growth Rate) of 9.5 per cent to US$ 300.The industry employs about 10 million Indians and continues to contribute signifigaly to the social and economic transformation in the country.accorting to a press release by IT market analysts Gartner in January 2014, worldwide IT spending grew by 04% to US$3.7trillion in Gartner projected growth of 3.1% in 2014 to US$3.8trillion.The report said that spending on devices(including PCs, ultramobile PCs, mobail phones, and tablets) contracted by 1.2% in 2013, but that it will grow 4.3% in 2014.In the last ten years the IT sector in India has grown at an average annual rate ISBN no Page 408

3 of 28%. India has emerged as the prefered destination for IT services owing to the cost advantage and talent pool.according to NASSCOM, India can reach $ 130 Billion in IT revenue by 2015, with CAGR of 14%. With this, it would be contributing to 7% of annual GDP and creating 14.3 million employment opportunities. India s GDP and the growth of Information Technology Industry. In Indian economy, the share of information technology industry s income in India s Gross Domestic Product has increased from 1.2percent in to 6.9 percent, in During the year , the actual GDP has grown to USD billion and the IT sector s income has increased from USD 5 billion in to USD101.7billion in the year Table 1 India s GDP and Information technology industry growth. Year/item India s GDP Income from ITSector % share of IT industry (USDbillion) USD(billion) in the GDP ISBN no Page 409

4 voice of research, vol.2, issue 4 The contribution of India s IT industry to economic progress has been quite significant. It has the tremendous potential of becoming an engine of accelerated economic growth. It provides facilities for productivity improvement for all sectors of the economy and means of efficient governance. India is one of the leading offshore destination in delivering engineering research and development (ER&D) services with a greater market share. According to NASSCOM, IT industry includes the five principal components, namely: (i)online business, (ii) IT services, (iii) IT-enabled services (iv)software merchandiseand (v) Hardware merchandise. The technology revolution for the last 15 years has triggered a huge growth in, massive educated, and technology focused workforce, which is leading India to become one of the major economies of the world by Revenue Table 2 IT-ITES industry s Revenue trends (in USD billion) Item/year ITES exports IT-ITES domestic total CAGR ISBN no Page 410

5 The IT-ITES industry has been growing at outstanding pace since IT and BPO sector s revenue as a proportion of India s GDP has expanded from 1.2% in 1998 to an estimated 7.5% in Indian IT-ITES industry revenue is estimated at USD105billion in FY as compared to USD95.2billion in FY registering an increase of around 10.3%. Export revenues of IT and BPO services (excluding hardware exports) in FY2010 are expected to grow at 5.5%.According to the Indian Finance Ministry the annual growth rate of the Indian economy is projected to have increased to 7.4% in as compared with 6.9% in the fiscal year In an annual report, the IMF forecast that the Indian Economy would grow by 7.5% percent in the fiscal years starting on April 1, 2015, up from 7.2% ( ). Exports The Indian Software and services industry is export driven. In , the total value of software and services export is estimated at Rs. 2,16,300 Crores (US$ 47 billion), an increase of 31.6 per cent in rupee terms and 16.3 per cent in dollar terms.it-ites exports is estimated to gross USD 86 billion in FY growing by13.1% over FY and contributing nearly 82% of the total IT-ITES revenues (excluding hardware). During the FY IT- ITES/BPO exports is likely to be at USD20billion, with a growth rate of 11.4% during Fy ITservices dominated the software products & ER&D achieved a double digit. Year/item CAGR IT services ITES-BPO ISBN no Page 411

6 growth rate of 10 percentage. The services of exports accounts for the largest share of 60.3%, BPO exports contribute 23.2% followed by the ER&D and software products that together accounts for 16.5%. Employment Nasscome report stated that during 2013, the IT industry added 160,000 employees and provided direct employment to 3.1million people and indirect employment to 10million people.this sector has also led to massive employment generation. The industry continues to be a net employment generator expected to add 230,000 jobs in FY2012, thus providing direct employment to about 2.8 million, and indirectly employing 8.9 million people. The potential contribution of information technology to employment generation is both direct and indirect. Directly the growth of the computer, hardware and software industries are generating new job opportunities in India. Indirectly the adoption of computer technology by other industries expands the range of services they provided and can stimulate more rapid growth of these sectors. Table 3 Level of knowledge professional employees in information technology sector (Employees number in 000 ) YEARS IT services Domestic BPO exports Total PRESENT exports markets employment GROWTH ISBN no Page 412

7 Source (i) (ii) figures do not include employees in the hardware sector Table 4 Employment in IT-ITES industry (in million ) Year/segment IT services exports BPO exports Domestic markets Total employmen Direct employment The IT sector is one of the largest sectors providing employment of more than 3 million people directly in the year of For the year of number of people employed in IT, exports are 1.29million, BPM exports are 0.88million. It domestic is 0.60million and totally, it is of about 2.77million. The sector provides indirect employment opportunities in construction, catering security, services, retail, and transport. In addition the IT sector provides employment to over 100,000forgine national and %( 8000, 000) women, the sector has a diversely qualified workforce with 25% of the workforce being domain specialists (chartered accountants, doctors, lawyers, statisticians, mathematicians, etc.). Objectives of the study i) To analyses the economic growth of information technology industry. ii) To study at employment growth in the IT industry. ISBN no Page 413

8 Methodology The data for this study is mainly from secondary sources collected through the journals, reports, research studies and internet. Analysis: Different trend models were attempted on the data for the variables - India s IT Exports, India s IT domestic production and India s total Revenue from IT industry. Among the models, tried simple Linear Trend Models were found to fit well to the observed data. The results of the models are given below. Result: 1 IT Exports Estimated Linear Model ITExp = t R 2 = t value: (-25.01) (25.09) F = From the results given above, the value of R 2 is and F= The value of F is significant at 5% level of sign ificance which reveals that the overall significance of the model is good. According to R 2 value, the fitted linear trend model explains 98.3percent of variation in the dependent variable. The t value of the regression co- efficients show that they are also significant at 5% level of significance. Here, the trend co- efficient is 1 = By using the estimated model India s IT exporsis projected to USD127.78billion for the year India s IT Domestic Production ISBN no Page 414

9 The estimated Linear Trend Model for India s IT domestic Production is: Result: 2 IT Domestic Product: - Estimated Linear Model ITDomestic Product = t R 2 = t value : ( ) (19.267) F = The value of F statistic (371.2) shows that there is overall significance for the fitted Linear Model. The value of R 2 (0.971) means that the estimated linear model explains over 97% of variation in the dependent variable, showing a good fit to the observed data. The values of regression co-efficients are also significant and this is evidenced from their respective t values. The trend co-efficient of the model is By using the estimated linear trend model, India s IT Domestic Production is projected to USD 31.30billion for the year Result:3 India s total revenue from IT Industry Linear Trend Model: The estimated linear trend model for India s total revenue from IT industry is given as : IT Total Revenue Estimated Linear Model IT Total Revenue = t R 2 = t value: -(27.61) (27.70) F = the overall significance of the estimate linear Model is evident from the F statistics (F=767.25). From the value of R 2 it is understood that the fitted linear trend model explains 98.6percent of the variations in the dependent variable (i.e) India s total revenue from IT Industry. The t value of the regression co efficients are also found significant. Here, the linear trend model for India s total Revenue is used in the forcasting and projected to USD159.07billion for the year 2020, which is well above 50 percent of its level. ISBN no Page 415

10 Conclusion The Indian IT industry is growing vibrant and contribute to the development on Indian economy. It provides basic information system for the development of almost all industries. The present study applied trend models to measure the trend growth of the Information technology variables. The estimated linear trend models exhibited positive trends and projected India s IT Export income, India s domestic IT income and Total income of the IT sector. The estimated trend models forecasted the above three variables for the year 2020 to be at USD127.78billion, USD 31.30billion and USD159.07billion respectively. On the basis of the estimated trend growths India s IT Export income, India s domestic IT income and Total income of the India s IT sector are expected to grow up to 48.6 per cent, 64.7 per cent and 51.5 per cent respectively in the year 2020 when compared to Therefore, the present study concludes that the Indian IT industry is growing steadily and positively contributes in terms of income and employment to the educated mass and to the growth of the Indian economy. ************************ ISBN no Page 416