2. IT INDUSTRY
IT INDUSTRY HAS 2 MAJOR COMPONENTS
• IT SERVICES
• BUSINESS PROCESS OUTSOURCING
THE SECTOR HAS INCREASED ITS CONTRIBUTION TO INDIA'S GDP FROM 1.2%
IN 1998 TO 7.7% IN 2017.. ACCORDING TO NASSCOM, THE SECTOR
AGGREGATED REVENUES OF US$160 BILLION IN 2017, WITH EXPORT REVENUE
STANDING AT US$99 BILLION AND DOMESTIC REVENUE AT US$48 BILLION,
GROWING BY OVER 13%. THE UNITED STATES ACCOUNTS FOR TWO-THIRDS
OF INDIA'S IT SERVICES EXPORTS.
3. GDP
• THE GDP OF INDIA IS DECLINING. THE
SLOWING ECONOMY IS AFFECTING THE
STRONG GROWTH SEEN IN THE
TECHNOLOGY SECTOR IN THE LAST 5 YEARS.
THIS HAS BEEN HIGHLIGHTED IN THE LAST
FINANCIAL EARNINGS REPORTS AS WELL.
• THE MID-CAP IT FIRMS HAVE ALSO
REPORTED THEIR WORST GROWTH
NUMBERS IN THE PAST FEW YEARS DUE TO
REASONS SUCH AS CUTS IN CLIENT
BUDGETS, DEFERRED PROJECTS AND
INCREASING EXPENSES OF MAINTAINING
TALENT IN THE US AND EUROPE, ANALYSTS
SAY.
• AS A RESULT, REVENUE IN TERMS OF
GROWTH ON YEAR-ON-YEAR FOR MID-CAP
IT FIRMS HAVE COME DOWN TO LOW TEENS
FROM HIGH TEENS EARLIER. A SLOWDOWN
IN REVENUE GROWTH MAKES THEM MORE
VULNERABLE TO REVENUE LOSSES WHEN IT
COMES TO THEIR TECHNOLOGY
OUTSOURCING
4. INFLATION
HIGH INFLATION IN THE ECONOMY RESULTS IN
INCREASE IN THE PRICES OF SKILLED LABOR WHICH IN
TURN REDUCES THE EMPLOYMENT RATE. AS A RESULT
IN ORDER TO COMPENSATE THE COST OF
PRODUCTION THE IT FIRM INCREASES THE COST OF
PRODUCT THUS RESULTING IN AN INCREASE IN PRICE
OF TECHNOLOGY.
5. RECESSION
AS THE TECHNOLOGY SECTOR
HAS A MUCH LARGER
DEPENDENCE ON GLOBAL
DEMAND, IT-BASED
OUTSOURCING IS WHERE
MOST OF THE REVENUE
CHUNK COMES FROM. IF THE
RECESSION HITS THE WORLD,
THE INDIAN IT SERVICES
MARKET MAY TAKE A HIT, AS
OUTSOURCING CONTRACTS
MAY SEE A DECLINE.
6. EXCHANGE RATE
• INDIAN IT SECTOR IS DEPENDENT ON FOREIGN
CLIENT FOR MORE THAN 70% OF ITS REVENUE. SO
THE FLUCTUATION IN THE EXCHANGE RATE CAN
BRING A CONSIDERABLE DIFFERENCE IN THE
PERFORMANCE OF COMPANY.
• IT SECTOR UNDERTAKES VARIOUS MEASURES LIKE
HEDGING EXCHANGE RISKS USING FORWARD AND
FUTURE CONTRACTS. THIS HELPS THEM IN
MITIGATING SOME OF THE LOSS DUE TO EXCHANGE
RATE FLUCTUATION BUT NONE THE LESS THE
IMPACT IS SUBSTANTIAL.
7. GOVERNMENT INITIATIVES
1. DIGITAL INDIA PROGRAM
THE DIGITAL INDIA WOULD ENSURE THAT GOVERNMENT SERVICES ARE AVAILABLE TO
CITIZENS ELECTRONICALLY. IT WOULD ALSO BRING IN PUBLIC ACCOUNTABILITY THROUGH
MANDATED DELIVERY OF GOVERNMENT’S SERVICES ELECTRONICALLY.
2. MEGHRAJ INITIATIVE COMPUTING
MEGHRAJ IS THE NAME GIVEN TO THE INITIATIVE OF GOVERNMENT OF INDIA FOR ITS NEW
PROGRAM WHICH IS GOING TO TAKE ADVANTAGE OF THE CLOUD COMPUTING. IT WILL
ENABLE THE GOVERNMENT TO LEVERAGE CLOUD COMPUTING FOR EFFECTIVE DELIVERY OF E-
SERVICES
3. CODE FREE FOR INDIA
THE INITIATIVE INVITES FREE SOFTWARE DEVELOPMENT COMMUNITY TO DEVELOP SOLUTIONS
TO ADDRESS LOCAL AND GLOBAL NEEDS.PROGRAMMERS WOULD BE INVITED TO DEVELOP
TOOLS AND DESKTOP APPLICATIONS, INTERNET APPLICATIONS, MOBILE APPLICATIONS AND
ENHANCE THE CLOUD AND INTERNET OF THINGS TECHNOLOGY.
8. GOVERNMENT
REGULATIONS
• 100% FDI IS ALLOWED IN THE
SOFTWARE/IT INDUSTRY ON AN
AUTOMATIC BASIS.
• AN EMERGING MARKET IS THE E-
COMMERCE INDUSTRY WHICH HAS
REVOLUTIONIZED THE TRADITIONAL
MEANS OF BUYING AND SELLING IN
INDIA. TO FACILITATE SUCH GROWTH
ALONG WITH THE DEVELOPMENT OF
A SECURE REGULATORY
ENVIRONMENT FOR THE MULTIPARTY
USE OF INFORMATION TECHNOLOGY
AND ELECTRONIC COMMERCE, THE
INFORMATION TECHNOLOGY ACT,
2000 ("IT ACT") WAS ENACTED.
