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    Indian IT Industry- An Overview

    Presentation by S. Lakshminarayanan, Addl. SecretaryMinistry of Communications & Information Technology, Government of India

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    Overview ofthe Indian Economy

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    Key Characteristics

    Economy de-linked from Political changes

    Stable pro-reform government at the centre

    Sustained growth in the face of Obstacles

    Ambitious Long-term growth plans

    Recognized as the economic powerhouse of the 21st Century

    Knowledge based industries are attracting investments and

    driving growth

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    Economy: Strong Fundamentals

    Sustained GDP growth over the last decade around 6% - despite significant

    obstacles

    Inflation reached all-time low in 2002 and and currently hovers around at 4.5%

    Comfortable foreign exchange reserves position US$ 88 bn (9/03)

    A stable Rupee (against major currencies) currently Rs. 46 per US$

    Pre-payment of foreign debt significantly improved Indias rating

    Post 9/11 Foreign Direct Investment (FDI) grew 52% over the previous year

    US$ 6.1 bn (2001-02)

    Falling interest rates driving consumer demand

    Based on PPP, India is the fourth largest economy (US $ 2.9 trillion)

    India An Economic powerhouse of the 21st CenturyIndia An Economic powerhouse of the 21st Century

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    Economy: Aiming for Rapid Growth

    GDP expected to grow 6.5% in 2003-04 8% p.a on an average over a fiveyear period (2002-2007)

    Aggressive infrastructure development goals

    Active involvement of Private enterprise to augment Ports, Roads,Airports, Power etc.

    Attract FDI in excess of US$ 10 bn annually

    Further simplification of legislation, de-licensing, setting up regulatoryauthorities such as Central/State Electricity regulatory Commissions, etc.

    Achieve US$ 115 bn potential in Electronics hardware and IT Services by

    2008

    India high on the Radar of many MNCs

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    Electronics & Information Technology

    Sunrise Industry and the

    Area of Growth for the

    Millennium

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    Indian Electronics & IT Industry

    One of the fastest growing sectors of Indian industry.

    A growth of 22% in production and 26% in exports during2002-03, a period marked globally by a fall in ICT revenue.

    Achieved a CAGR of 25% in production and 41% in

    exports during last 5 years.

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    Indian Industry Grew at over 35% CAGR between 1999 and 2003

    Key factors behind growthin exports

    US IT investment boom

    Onsite staff supplementationgrowth fuelled by majortechnology waves

    Offshore growth led byanchor MNC customers

    New emerging service lines(R&D services, BPO)

    Per cent

    $ million

    10,000

    2,7001,250

    2,650

    FY 99 FY 03

    12,700

    3,900

    CAGR

    35%

    40%

    ExportsDomestic 22%

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    Overview

    Large growth potential

    Burgeoning Consumer base exposed to the latest

    Increasing outsourcing trend

    Exports and global outsourcing will drive future growth

    Leveraging India advantage

    Indian technology production companies havedemonstrated capabilities to compete in the global market

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    Exports - 2002-03

    CAGR

    Value Growth (5 years)

    IT & Electronics - Rs. 53,100 crore 26% 41%( $11.2 billion )

    Hardware - Rs. 5,600 crore -3% 14%( $1.2 billion )

    Software & Services - Rs. 47,500 crore 30% 49%

    ( $10 billion )ITES (part of - Rs. 11,700 crore 65%S/w & services) ( $2.5 billion )

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    Strong Performance and Growth Potential

    8.15

    10.4

    2.7 40

    60

    15

    0

    20

    40

    60

    80

    100

    120

    inU

    S$

    billions

    1996-97 2002-03 2008E

    Electronics Hardware Software - Exports Software - Domestic

    US$ 21.25 bn

    US$ 5.8 bn

    US$ 115 bn (Estimated)

    CAGR96-97 to 02-03: 24%02-03 to 08-09: 32%

    By 2008, India will build a US$ 40 billion Electronics Hardware Industry

    Source: Ministry of IT, MAIT

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    Global Outsourcing a Key Driver for Exports

    1999-2000 2002-03

    10.4

    1.2

    4

    0.6

    0

    2

    4

    6

    8

    10

    12

    in

    US$

    billions

    Software & Services Electronics Hardware

    Electronics Hardware

    exports Doubled

    in last 3 years

    Present wave of global outsourcing likely to benefit India significantly

    Source: Ministry of IT, MAIT

    O S f S

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    Opportunities in Software Sector

    (McKinsey Report) Year 2008

    Total Market Exports

    IT Services Exports $ 28-30 bn $ 28-30 bn

    Software Products $ 8-11 bn $ 8-11 bn

    IT Enabled Services $ 21-24 bn $ 21-24 bnExports

    Domestic Market $ 13-15 bn

    Total $ 70-80 bn $ 57-65 bn

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    IT Industry by the Year 2008

    IT Exports

    35% of Indias Total Exports in 2008

    from 20.4% during 2002-03

    Share of IT Software & Services Industry in GDP

    Likely to be 7% of GDP in 2008

    from 2.4% of GDP during 2002-03

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    The India Advantage

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    Why India?

    Rapidly Improving Infrastructure

    Large Talent Pool Availability

    High Quality Educational Infrastructure

    Low Operating Costs

    R&D Strengths

    Established Technology Clusters

    Government Incentives

    L T l t P l i I di Gi it Si ifi t Ed

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    Large Talent Pool in India Gives it a Significant Edge

    Education Statistics

    10,600 accredited institutions

    Over 3 mn graduates & Post Graduates per

    annum

    675,000 Technical Graduates p.a which

    include

    375,000 Engineers

    ~ 50,000 Management Graduates

    Large pool of English speaking, computer

    savvy graduates

    No of people Employed: 2003

    IT Enabled

    Services

    Software Electronics

    Hardware

    160,000

    385,000

    500,000

    0

    50,000

    100,000

    150,000

    200,000

    250,000

    300,000

    350,000

    400,000

    450,000

    500,000

    W

    orkforceNumber

    Significant portion of new graduates are being employed by the Electronics hardware and IT Sector

    8Source: Department of Education, Ministry of HRD, E&Y Research

    Source: Ministry of IT, Press Reports

    E ll t f k l d d h

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    Excellent sources for knowledge and human resources

    10,000Degree Colleges

    66IIMs*11IISc*

    22IIITs*

    77IITs*

    29255284Universities / Deemed

    Universities

    PrivateGovernmentTotalDescriptions

    *

    IIT Indian Institute of Technology

    IIIT Indian Institute of Information Technology

    IISc Indian Institute of Science

    IIM Indian Institute of Management

    India has successfully developed world-class technical and management institutions over the last 40 years

    Source: STPI

    Si ifi t t th i R&D

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    Significant strengths in R&D

    175 of the Fortune 500 companies have R&D

    operations in India

    A vast network of state-owned national researchlaboratories provides world-class support

    IT R&D services currently account for more than 15%

    of total IT exports.

    TI has secured

    225 US patents forwork done in

    Embedded Softwareand VLSI

    Every Philips

    product havingsoftwarein it has a

    contributionfrom the

    Bangalore campus

    HP Labs does

    high-level researchon futuristic

    Technologiesfor emerging

    markets.

    Source: Press Reports

    Hi t h l t f l ti i ti

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    Hi-tech clusters for accelerating innovation

    Software Technology Park (STP) centers in 35

    cities across the country

    Approval for setting up of 21 Special Economic

    Zones (SEZs) in various parts of the country

    Electronic Hardware Manufacturing Clusters

    exist in Bangalore, Goa, Hyderabad, Mumbai,

    Noida, Pondicherry

    Source: SEZ Website, STPI

    Investor Friendly Government Policies

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    Investor Friendly Government Policies

    FDI regime liberalized most sectors de-licensed

    Liberalization of foreign exchange regulations

    Rupee convertibility on trade account

    Unrestricted repatriation of Capital & Dividend allowed

    Foreign exchange earnings can be retained in overseas accounts

    Rationalization of Customs duty structures

    Indirect tax reform - proposal to introduce VAT

    Profits on exports under EHTP/STP scheme exempt from tax till 2010

    Introduction of SEZs to boost manufacturing

    IPR protection new patent law

    Labour reforms

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    Thank You