Indian IT sector to grow to $225 billion by 2020

Although the Indian IT industry has grown from $2 billion in export revenues in 1998 to $47 billion, it has the potential to generate revenues of $ 225 billion in 2020, Nasscom and the government takes specific measures over the next 12 years to realise these opportunities, said the Indian IT trade body Nasscom.

Releasing its Perspective 2020: Transform Business, Transform India yesterday, based on extensive research conducted over a year by McKinsey & Company, the IT and ITeS trade body said that the next decade will be fundamentally different from the last one, owing to a radically restructured global economy, rapidly evolving customer needs, services and business models.

The IT trade body suggested, that if the industry and the government should take specific measures over the next 12 years to realise these opportunities.

Nasscom  says that most incremental revenue growth by 2020 will be driven by opportunities outside of the current core markets, verticals and customer segments, and the industry needs to redefine its value proposition to capture these.

The report defines new verticals such as the public sector, healthcare, media and utilities while the new customer segment as small and medium businesses (SMBs) and the market for these are the BRIC, GCC, Japan and Rest of the World.

If the Indian IT industry can tap these segments in the international market, the export revenues can grow from $47 billion today to $175 billion by 2020 while the revenues from the domestic market can be increased four-fold, from $12 billion in 2008 to $50 billion by 2020.

The report says that the evolved landscape of 2020 will present transformational opportunities for the Indian technology and business services industry, where India will emerge as a top three global innovation hub with a focus on clinical research, mobile applications and energy efficiency/climate change solutions.

Som Mittal, president, NASSCOM, said, ''The Indian IT industry is in the midst of unprecedented times because of the current economic environment. We expect the next few quarters to be extremely challenging with companies doing everything required to effectively overcome the challenges. As we continue to address the present situation, we also need stay focused on the opportunities being created by the megatrends underway. India's value proposition remains strong for sustained long term growth.''

Although predicting a rosy picture for the future of the Indian IT industry, the report says that four major challenges of employability, infrastructure, favourable policies and competition from other low cost countries still exists.

The major bottleneck for IT growth in India is that the country has only 10-15 per cent employable graduates in business services and 26 per cent employable engineers in technology services.

The lack of a supportive fiscal environment with a long-term policy framework is also leading to competition from other low-cost countries including China, Philippines and from Eastern Europe with potential erosion of the India opportunity.

Outlining the challenges ahead for the Indian IT industry, Noshir Kaka, Director, McKinsey & Company said ''While the industry has the potential to generate revenues of $225 billion in 2020, a portion of this opportunity is at risk if continuing problems are not tackled soon.''

''Since 40 per cent of previous priority initiatives, especially structural changes e.g. tertiary education reform, have not been implemented yet, employability remains low as a result. Other areas of public infrastructure and business environment also need a concerted effort to ensure that India's long-term opportunity isn't lost to other competing global destinations,'' he added.

Ranjit Tinaikar, Partner, McKinsey & Company said, ''Success for the industry requires an action plan anchored on a five-fold vision. It is imperative that all the stakeholders work in close collaboration and drive swift and sustained reforms in all critical areas.''