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India’s Information Technology industry: prospects for growth and role in structural transformation

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Abstract

The idea that service-sector industries, rather than manufacturing, can drive growth and structural change has caught the imagination of several scholars and policy-makers. For India, the Information Technology (IT) industry is often cited as an example of one such industry. However, empirical evidence for such claims is still weak. This article evaluates the Indian IT industry’s potential for growth. Most studies on the subject focus on the narrower segment of IT-Services in India while we take a holistic view and consider the potential of both software product and services, IT hardware, outsourced/offshored business processes, and activities involved in creation of intellectual property. We evaluate the present position and future prospects of the industry including India’s position in the technology value chain as well as future opportunities for the industry in the context of relocation of global manufacturing value chains and growth of the domestic market. We also discuss the likely impact of technology on jobs in the overall economy, direct and indirect job creation potential of the IT-BPM (Business Process Management) sector and the spill-over effects of technology as an enabler of new business models. Finally, we draw some lessons for effective industrial policy.

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Fig. 1

Source: India’s Economic Survey (2019)

Fig. 2

Source: India’s Economic Survey (2019)

Fig. 3

Source: India Brand Equity Foundation

Fig. 4

Source: India’s Economic Survey (2019)

Fig. 5

Source: Gupta et al. (2017)

Fig. 6

Source: KLEMS Database

Fig. 7

Source: Khatiwada and Flaminiano (2019)

Fig. 8

Source: India’s Economic Survey (2019)

Fig. 9

Source: Author’s own understanding of the industry

Fig. 10

Source: Jui (2010)

Fig. 11

Source: www.ceic.com

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Notes

  1. Voice refers to all conversational interactions between a company and its customers, e.g., a bank’s customer seeking clarification on charges levied on his/her credit card- queries that are standard and usually have a scripted solution from the bank. Non-voice work refers to processing of customer transactions, e.g., processing related to loans disbursed by banks. Other non-core and standard activities amenable for execution outside an organzation’s physical boundaries include payroll processing, pre-recruitment employee background checks, operational finance, etc. The BPM segment also includes jobs which are knowledge intensive and often need professional qualifications such as in Accounting and Financial Analysis.

  2. Directed toward job creating investments, states provide single window clearance, assured power supply, world-class telecom infrastructure, as well as liberal incentives in the form of reduced stamp duty, exemptions from land zoning regulations, incentives on training, reimbursement of quality certification costs, preference in government procurement, investment subsidy, exemption from Industrial Employment rules and others (AP Govt ICT Policy 2002–2005, 2005–2010, 2010–2015; Karnataka ICT Group 2020 Report; Kandalam 2019).

  3. These jobs are in construction, retail, restaurants, transportation, hospitality, healthcare and other sectors.

  4. The sample used for the analysis consists of 20,994 respondents, 82.3% of which are men and 17.7% women. Employees from different age groups, industries, and various hierarchical positions in their respective occupations are included.

  5. The authors use 5775 data points collected directly from employees, users, and job advertisements posted on Indeed.com (a leading job portal) over a period of 36 months. For senior level salaries, they use an existing study of more than 3000 executives.

  6. We have compared India’s performance to only China and USA—the former because of a large domestic IT market and a potential threat to India’s dominance in the global market and the latter because of its high share in overall world IT-BPM spending. Other countries such as Philippines, Poland and others have not been considered as they are much smaller than the Indian IT-BPM industry and given that they do not cover the entire spectrum of IT-BPM services, do not pose an existential threat to Indian IT-BPM.

  7. This includes decisions related to timing of introduction, withdrawal or upgrades in existing products.

  8. Software can also be classified on the basis of how directly it interacts with the hardware: system software, middleware and application software.

  9. This includes all kinds of R&D expenditure though a large part of it is tech-driven across industries and not just specific to IT industries.

  10. Source: https://www.vox.com/2018/4/9/17204004/amazon-research-development-rd.

  11. https://www.automationanywhere.com/lp/gartner-magic-quadrant.

  12. Based on a telephonic conversation with Mr Sumeet Pathak- Digital Evangelist, IMEA (India, Middle East & Africa) for Automation Anywhere.

  13. https://www.livemint.com/industry/manufacturing/why-manufacturers-are-not-rushing-into-india-11570429217983.html.

  14. Source: https://economictimes.indiatimes.com/tech/hardware/indias-pc-manufacturing-capacity-under-utilised-up-to-80-as-per-industry-ravi-shankar-prasad/articleshow/70363415.cms.

  15. Spending by top verticals in Rupees crores for FY12 (BCG-CII 2013) was as follows: Banking (18,500), Telecom (15,000), Manufacturing (12,300), Media, Publishing & Entertainment (10,700) and Retail (6600).

  16. One of the authors (Gaurav Gupta) has worked for several years in Banking. The following is partly based on his personal knowledge of the industry.

  17. Blockchain, Data Analytics, Artificial Intelligence (AI), 3Dprinting, Internet of Things (IoT), Automation & Robotics, Cloud Computing.

  18. https://www.ghspl.com/.

  19. https://widgets.weforum.org/techpioneers-2020/stellapps/ and https://www.stellapps.com/.

  20. Germany’s Industrie 4.0, UK’s Industrial Strategy 2017, China’s Made in China 2025 and USA’s Advanced Manufacturing Partnership.

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    Gaurav Gupta & Amit Basole

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  1. Gaurav Gupta
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Gupta, G., Basole, A. India’s Information Technology industry: prospects for growth and role in structural transformation. Decision 47, 341–361 (2020). https://doi.org/10.1007/s40622-020-00269-z

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