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The Current Status and Future Prospects of India- The Current Status and Future Prospects of India Taiwan Relations ICRIER-CIER Joint Feasibility Study A O i fI di IT ITES Id t An Overview of Indian IT -ITES Industry Scope for India-Taiwan Cooperation Durgesh K. Rai 18/01/2011 18/01/2011 New Delhi
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  • The Current Status and Future Prospects of India-The Current Status and Future Prospects of IndiaTaiwan Relations

    ICRIER-CIER Joint Feasibility Study

    A O i f I di IT ITES I d tAn Overview of Indian IT-ITES IndustryScope for India-Taiwan Cooperation

    Durgesh K. Rai18/01/201118/01/2011New Delhi

  • OutlineOutlineImportance of IT industry in IndiaImportance of IT industry in IndiaStructureTrends and PatternsTrends and PatternsScope for India-Taiwan CooperationWay forwardWay forward

  • Significance of IT Industry in Indian Economy: Annual growth rates

    50

    40

    45

    50

    30

    35

    15

    20

    25

    5

    10

    02001 2002 2003 2004 2005 2006 2007 2008 2009

    GDP growth rate (at constant 1999-00 prices) IT industry growth rate

    Source: CMIE Database and NASSCOM Strategic Review Reports (2005, 06, 07 and 10), compiled by author

  • Significance of IT Industry in Indian Economy: Share in GDP

    780

    6

    7

    60

    70

    80

    4

    5

    40

    50

    60

    2

    3

    20

    30

    40

    0

    1

    0

    10

    20

    002000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E

    IT industry revenue (US$ billions) IT industry share in GDP (%)

    Source: NASSCOM Strategic Review Reports (2005, 06, 07 and 10), compiled by author

  • Significance of IT Industry in Indian Economy: Employment generation (excl. hardware)

    2.502.20

    2.30

    Employment (in millions)

    2.00

    1.63

    2.00

    1.00

    1.50

    0 83

    1.06

    1.29

    0.50

    1.00

    0.280.43

    0.520.67

    0.83

    0.002000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

    Source: NASSCOM Strategic Review Reports (2005, 06, 07 and 10), compiled by author

  • Significance of IT Industry in Indian Economy: Contribution in total exports

    16.0

    18.0

    20.0

    250.0

    300.0

    12.0

    14.0200.0

    6.0

    8.0

    10.0

    100.0

    150.0

    2.0

    4.0

    6.0

    50.0

    0.00.02000 2001 2002 2003 2004 2005 2006 2007 2008 2009

    Total exports (US$ billions) IT exports (US$ billion) Share in total export (%)

    Source: WTO Trade Statistics 2010, UNCTAD Trade Statistics and NASSCOM Strategic Review Reports (2005, 06, 07 and 10), compiled by author

  • Structure of Indian IT Industry

  • Trends and Patterns: Software and services vs. Hardware

    80.00

    90.00

    100.00

    60.0

    70.0

    80.0

    50.00

    60.00

    70.00

    40.0

    50.0

    60.0

    20.00

    30.00

    40.00

    20.0

    30.0

    0.00

    10.00

    0.0

    10.0

    2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 E

    Hardware (US$ billions) Software and services (US$ billions)Total revenue (US$ billions) Share of hardware in total IT revenue (%)Share of software and services in total IT revenue (%)

    Source: NASSCOM Strategic Review (2005, 06, 07 and 10), compiled by author

  • Trends and Patterns:Trends and patterns within software and services

    100.017.4 17.5 20.2 20.5 20.1

    60.0

    80.020.4 23.8 22.1 22.7 23.1

    40.062.3 58 7 57 7 56 8 56 9

    20.0

    58.7 57.7 56.8 56.9

    0.02004 2006 2008 2009 2010E

    IT services (%) ITES-BPO (%) Engineering services & S/w products (%)

    Source: NASSCOM Strategic Review (2005, 06, 07 and 10), compiled by author

  • Trends and Patterns: Exports vs. Domestic Market

    80 060

    40 9

    47.550.1

    60.0

    70.0

    80.0

    50

    60

    24 2

    31.7

    40.9

    40.0

    50.0

    30

    40

    7 69.9

    13.4

    18.2

    24.2

    8 310.2

    13.216.2

    22.0 21.9 23.0

    20.0

    30.0

    0

    20

    46.2 7.6

    4.3 5.9 5.76.3

    8.3

    0.0

    10.0

    0

    10

    2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

    Exports revenue (US$ billions) Domestic revenue (US$ billions)

    Share of exports in total revenue (%) Share of domestic market in total revenue (%)

    Source: NASSCOM Strategic Review (2005, 06, 07 and 10), compiled by author

  • Trends and Patterns: Patterns and structure of exportsTable : Structure of IT export from India (US$ billions)

    Export items2004 2005 2006 2007 2008 2009 2010 E

    7 3 10 13 3 17 1 22 2 25 8 27 3

    Table : Structure of IT export from India (US$ billions)

    IT services7.3

    (54.5 %)10

    (54.9%)13.3

    (55.0%)17.1

    (53.8%)22.2

    (54.3%)25.8

    (54.3%)27.3

    (54.5%)

    ITES-BPO3.1

    (23.1%)4.6

    (25.3%)6.3

    (26.0%)7.6

    (23.9%)9.9

    (24.2%)11.7

    (24.6%)12.4

    (24.8)

    Engineering services & S/w products

    2.5 (18.7%)

    3.1 (17.0%) 4 (16.5%)

    6.6 (20.8%)

    8.3 (20.3%)

    9.6 (20.2%)

    10.0 (20.0%)

    0 5 0 5 0 6 0 5 0 5 0 4 0 4Hardware

    0.5(3.7%)

    0.5 (2.7%)

    0.6 (2.5%)

    0.5 (1.5%)

    0.5 (1.2%)

    0.4 (0.8%)

    0.4 (0.8%)

    Total Revenue13.4

    (100%)18.2

    (100%)24.2

    (100%)31.7

    (100%)40.9

    (100%)47.5

    (100%)50.1

    (100%)

    Note: Figures in parentheses are percentage of total exports of IT sectorSource: NASSCOM Strategic Review (2005, 06, 07 and 10), compiled by author

  • Trends and Patterns:Annual growth (%) in various segments of exports

    50.0

    60.0

    70.0

    20 0

    30.0

    40.0

    10 0

    0.0

    10.0

    20.0

    2005 2006 2007 2008 2009 2010 E

    -30.0

    -20.0

    -10.0

    IT services ITES-BPO Engineering services & S/w products Hardware Total Revenue

    S NASSCOM St t i R i (2005 06 07 d 10) il d b thSource: NASSCOM Strategic Review (2005, 06, 07 and 10), compiled by author

  • Exports: Industry verticals and d ti ti (2010 E)destinations(2010 E)

    Constr & Other , 2% Europe APAC

    BFSI 41%R t il 9%

    Healthcare, 4%

    T&T, 3% utiliities, 3%

    MPE, 2%

    p(excludin

    g UK), 12%

    APAC, 7% RoW, 2%

    BFSI, 41%

    Hitech/Tele20%

    Manufacturing, 16%

    Retail, 9%

    US, 61%UK, 18%

    om, 20%

    Exports: well diversified across theindustry verticals but banking, financialservices and insurance (BFSI) isdominant

    Traditionally the US and UK have been mostimportant destinations: socio-cultural affinity, majorspenders on technology and early adopters of globalsourcing model

    Although the global financial crisis hadmaximum impact on BFSI, IT spendinghas not significantly reduced

    Over the past few years revenue growth from the UShas lagged other regions, but trend was reversed in2010. IT spending has increased in post crisis period

    Retail & healthcare: emerging verticals Asia Pacific: emerging region for Indian serviceproviders: Japan.

  • Trends and Patterns:Patterns and structure of domestic marketFigure : Patterns and Structure of Domestic IT Market (in US$ billions):

    25

    Figure : Patterns and Structure of Domestic IT Market (in US$ billions):

    20

    10.29 9.019

    10

    15

    1.58 1.932.29

    1 6

    2.232.69

    2.77

    5 24

    6.5

    7.98

    5

    3.11 3.51 4.55.53

    7.88 8.23 8.940.3 0.60.9

    1.1

    0.72 0.851.3

    1.64.17

    5.24

    02004 2005 2006 2007 2008 2009 2010E

    IT services ITES-BPO Engineering services & S/w products Hardware

    Source: NASSCOM Strategic Review (2005, 06, 07 and 10), compiled by author

  • Scope for India-Taiwan CooperationBoth known for IT prowess, global oriented, vital component of world IT supply chainIndia: leading destination for IT software and services sourcingTaiwan: strong in manufacturing or hardware segmentTaiwan: strong in manufacturing or hardware segmentBilateral engagements between the two IT industries is limitedImmense opportunity for strengthening bilateral engagementsC l t iti i li tl kComplementarities in policy outlook

    - India is trying to expand its IT manufacturing base along with moving up inthe software and services value chain

    - Taiwan is promoting the industry to move into high-end services like designi R&D i di it l t t tservices, R&D services, digital content, etc.

    Complementarities in strengths in IT industry: Indias strength in software could be meshed with Taiwans prowess in hardwareS f t d i : i t f t lik PC d i h l 3G bilScope for trade expansion: variety of segments like PC and peripherals, 3G mobileequipments and phonesTaiwan is looking for diversify its sourcing option: India offers vast pool of labour force, stable and fast growing economy, advanced ICT investment environment, g g y, CGreat potential for Taiwanese firms to outsource a host of requirements from IndiaCollaboration between companies from both sides will be a win-win situation forcompeting and capturing the world marketp g p g

  • Way forwardLimited knowledge: hardly any detailed study

    Both sides are still more focused on conventional markets - India: US and Europe,Taiwan: PRC

    There is a need for a comprehensive study that can offer clear understanding of eachothers market

    A b d h i d tA survey-based research required to(a) Study the the potential of enhancing bilateral trade and investment(b) Identify barriers( ) Id tif f ti(c) Identify areas of co-operations(d)Examine existing regulations in both markets and suggest what the

    governments should do

  • Thank YouThank You


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