Journey of IT Industry in India

journey of IT industry in India

Almost every engineer after his graduation gets placed into an IT company. IT companies on the other hand recruit in 100s from a single university and they boast about their recruitment. You might have wondered how these companies have started in India, where are they located. How much do they contribute to our economy? Let us look at all of these aspects of IT industry in India as a whole.

Information technology in India was started in 1967 by the establishment of TATA group. The first software export zone which was known as SEEPZ was established in 1973. Around 80% of the country’s exports were from SEEPZ. During 1985-90’s US based companies started to outsource work on low cost and skilled talent pool in India. Currently Indian IT sector employs around 10 million workforce.

Due to globalization in 90’s and increasing internet usage, the economy of India grew by 6% and this period was considered as the birth of Indian Information technology as the revenues generated by the companies started to rise exponentially. Looking at the future opportunities in India, investments in R&D and infrastructure have increased and India has become a hub for product development by 2000.

In 1998 IT sector has contributed about 1.2% to GDP and this was increased to 7.5% in 2012. The major players in this sector in India are TCS, Infosys, Wipro, Cognizant and HCL. TCS is the market leader in IT & ITES segment till date.

The total revenue generated from this sector over the years is given below

Accounting Year Total IT exports (in US bn)
1980 0.004
1985 0.028
1990 0.131
1995 0.794
2000 6.540
2005 25.69
2010 50.41
2015 147.0


The revenue mentioned above consists of 2 parts. They are export revenue and domestic revenue.
By 2000 the demand for IT services increased multifold and as a result the number of firms in India grew which are offering complex services such as product management. Many US and Europe based companies started setting up their branches in India. This was done to utilize the low cost and talented labor in India.

Indian software exports are huge roughly US$75bn in 2014/15. But the overall pattern of growth rate is slowing: the ten-year annual growth average was 40% in 2002; 30% in 2008; 20% in 2014.

journey of IT industry in India

Due to decline in growth rates the companies are changing their strategy to low cost and high productivity. In the early 1990s, 75% of work took place on-site, 25% in India. By 2013/14, it was said that 20% of work took place on-site, 80% in India. As per the NASSCOM report productivity (as measured by average revenue per employee) in the Indian software sector has risen from US$7,000 per head in the mid-1990s, to US$16,000 in the late 1990s, to US$38,000 in 2014.

However US giants outsourcing work to India do not outsource the high-end SDLC (Software Development Life Cycle) processes like high-level design and architectural design, although some Indian IT players have enough competency to take up and successfully complete these high-level software jobs.

The other prominent trend is that IT jobs, once confined to Bangalore, Hyderabad are slowly starting to experience a geographical diffusion into other cities like Chennai, Kolkata and Pune.

Bangalore alone accounts for more than 35% of all IT companies present in India and contains close to 5,000 companies, making it India’s largest IT contributor.

Hyderabad has close to 3000 companies operate from the city.

The growth is not fast-paced; this can largely be attributed to the improper attitude of the government in providing proper telecommunications infrastructure to these companies.

External factors like Brexit, Trump’s policies on H1-B visas are likely to impact the growth rate of Indian IT sector and it might face a steep fall in the next two years. We can expect a pessimistic growth rate of around 6% in the 2017-2018 year. Due to these issues the future of IT sector in India remains unclear.

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