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DOI:10.6531/JFS.2017.22(1).A39 .39 A R T I C L E Year 2025: Two Scenarios For the Indian IT Industry Shyam Sankar S.
  .39 DOI:10.6531/JFS.2017.22(1).A39 Journal of Futures Studies, September 2017, 22(1): 39–56 A R T I C L E Year 2025: Two Scenarios For the Indian IT Industry Shyam Sankar S.University of KeralaIndiaManoj ChangatUniversity of KeralaIndia Abstract The Indian IT industry has been an important pillar of the Indian economy for the last 2 decades. The IT sector has provided employment opportunities to millions, provided them with fairly high incomes in the context of the  prevailing economic conditions in India, and has also been contributing handsomely to the country’s GDP. Successive governments have realized the importance of the Indian IT sector to further India’s economic advancement and have  facilitated the growth of the sector, depending on it for employment generation and for bringing in foreign exchange. The Indian IT sector has grown from strength to strength from 1996, when the total revenue was USD 1.25 billion, and is now in very good health with its total revenues amounting to an estimated USD 143 billion in 2016. The official future, on which National Policy on Information Technology is developed, envisions the continuing growth of the Indian IT industry. But, will this ideal growth continue? Can anything go wrong? This paper identifies the one core segment that has driven the growth of the Indian IT sector and develops two scenarios for the core segment. Keywords:  Indian IT industry, India, Scenario, Horizon Scanning. Introduction A quarter century has passed since India opened up its economy (Guru, 2016, p.16). Indian economy has grown tremendously since. The Indian software industry has played a very important role in the growth of the economy - playing the dual role of a job generator and that of a sector bringing in valuable foreign exchange. For a population that had struggled to rise above poverty for four decades since Independence, the software industry, offering mind boggling salaries against the backdrop of the economic conditions prevailing in India, had presented a beacon of hope. During this time period, in the context of the peculiar cultural milieu of India, the dream of every Indian parent changed from seeing the child being employed in a government office, safe in the security provided by a government job, to seeing the child as a software engineer earning high salaries. For  Journal of Futures Studies 40 the last two decades, nothing has changed on that front. The Indian software industry still continues to hold sway as the preferred employment sector for youngsters. The government too looks upon the software industry as a sector that can generate jobs (Department of Electronics and Information Technology, 2012). That is the niche that the Indian IT sector has been able to carve for itself in the economic, social, and psychological space of India in a span of two decades.From the setting of the Indian society described above, it is evident that the good health of the Indian IT industry is of prime importance for the sustenance of the economic growth of India. The official future scenario for the Indian IT sector is its continuing growth, especially the software services sector, resulting in employment opportunities for the many engineering graduates that India produces every year. The question that has to be asked is: Is the software services industry, in the future too, bankable as a default job generating sector that acts as a driver for economic growth?This paper attempts to: (a) identify the prominent drivers that will have an impact on the Indian IT sector in the future by looking at the current situation, and also by using the Horizon/Environment scanning methodology to identify weak signals; and (b) draw up two scenarios for the Indian software services sector for the year 2025 using the scenario development methodology.The aim of this paper is to stimulate the thinking of the policy and decision makers beyond the official scenario of a rosy future. Structure of the Paper This paper is divided into the following major sections: The next section is a brief look at the srcin and growth of the Indian IT Industry. The subsequent two sections identify the segments of the Indian IT industry that have acted as the engines of its growth. The section after that looks at some of the relevant studies in the Futures journal related to the future of Indian IT industry. In the next section, the paper deals with the various factors that nurtured the growth of the sector. This is followed by an explanation of the methodologies used in this paper. In the section after that, the external drivers used for the scenario development are explained. The scenarios that are developed are then presented. The paper ends with a concluding section. The Indian IT Industry – A Peek Into Its Origin and Growth India became a democratic republic in 1950. The national government introduced computers in to the country as early as 1955-56 (Rajaraman, 2015). IBM was the prominent player in the computerization efforts of India. But even after 2 decades thereafter, financially, the country was struggling to find its feet as the vision for the financial growth of the nation had still not stabilized. Restrictive economic policies were prevalent then. A handful of local software companies had cropped up to cater to a few government offices and departments, but domestic software market was miniscule and scope to export software was limited due to the prevailing economic policies. But along the way, another opportunity opened up for the Indian software companies. A few companies in the US were facing shortage of skilled engineers, and Indian companies filled the breach by exporting skilled manpower to augment the staff of software development teams in the US. One of the first Indian IT companies to utilize this business model of placing engineers abroad was TCS, set up in 1968. The US was facing shortage of skilled manpower to meet the demand of their computer industries. India was producing engineering graduates who were faced with lack of job opportunities. This situation made for a perfect business opportunity as the Indian skilled manpower was available at extremely low costs compared to those in the US. The Indian engineering graduates had a fair grasp of the English language, and this created a great opportunity for the handful of Indian IT companies, with such a workforce, to cater to this demand for staff augmentation (Rajaraman, 2015). This business model continued for a few years. 1991 was a seminal year in the economic history of India (Guru, 2016).  41 Year 2025: Two Scenarios For the Indian IT Industry The government of the day introduced game changing reforms in the economic sector that opened up the economy. For the IT industry, the economic conditions became favorable for executing projects in India, and the business strategy started to shift from providing manpower to providing software services from India. Slowly, many IT companies started mushrooming and IT projects started getting outsourced to India. TCS, Infosys, CTS, Wipro, and HCL were some of the pioneering software service providers. The Indian IT industry embarked on a path of growth, becoming a major job provider as well as becoming a major contributor to the nation’s economy. The total revenues of the Indian IT industry now stands at USD 140 billion plus. India is now the most preferred destination for IT outsourcing, with a share of more than 50% of the global IT sourcing market (NASSCOM, 2016). For a nation that is often grouped with poor third-world countries, to be considered now as the most preferred IT services provider is a remarkable growth story. The Indian IT industry – Today This section makes an attempt at painting the picture of the state of the Indian IT industry as it stands today. For this purpose, data is gathered from ‘National Policy on Information Technology 2012 [NPIT 2012]’ released by Department of Information Technology, Government of India; ‘Report of the Working Group on Information Technology Sector, Twelfth Five Year Plan (2012  – 17)’, Department of Information Technology; ‘Survey on Computer Software & Information Technology Enabled Services Exports: 2014-15’, Reserve Bank of India; and ‘The IT-BPM Sector in India: Annual Strategic Review’ - 2004 to 2016, NASSCOM. The following section titled ‘The Growth Engines’ too uses the data gathered from the above mentioned sources.India has a population of 1.25 billion. Out of this, 66% of the population is below 35 years of age. Further drilling down, 0.21 billion, or approximately 17% of the population is in the age group 20-30 (Office of the Registrar General & Census Commissioner, 2011). India produces between 0.6 to 0.7 million engineering graduates every year (AICTE Dashboard, 2016). For the Indian economy to grow and, politically, for any democratically elected government to survive, generating enough employment opportunities for this young, aspirational population segment is of utmost importance. It is on this front that the Indian IT industry has been, for the last decade and half, a default pillar of support that every government could lean on. The Indian IT sector now employs 3.7 million persons (NASSCOM, 2016), making it the largest private sector employer in the country (NASSCOM, 2015). Figure 1 shows how the employment figures in the Indian IT industry have grown from the year 2000 when the number of persons employed was 0.28 million to the present figure. 43.532.521.510.50 Employment in Indian IT sector (million)    2   0   0   0   2   0   0  1   2   0   0   2   2   0   0   3   2   0   0  4   2   0   0   5   2   0   0   6   2   0   0   7   2   0   0   8   2   0   0   9   2   0  1   0   2   0  1  1   2   0  1   2   2   0  1   3   2   0  1  4   2   0  1   5   2   0  1   6 Figure 1.  Employment in Indian IT industry - 2000 to 2016  Journal of Futures Studies 42 According to the ‘Working Group Report on Information Technology’, the average age of those working in the Indian IT industry is between 25 and 28, and this is expected to be 29 by 2020 (Twelfth Plan Working Group on Information Technology, 2012).In addition to being an employment generator, another area in which the Indian IT industry has played a prominent part in the economic growth story of India is in its contribution towards the nation’s GDP. The contribution of the Indian IT industry to the GDP has also been steadily growing - from 4.8% in 2006 to 9.5% in 2016. This is a remarkable achievement for a young industry in a country where the economy used to be predominantly agrarian and the primary contributor to the GDP was agriculture till the 1980s. Figure 2 shows how the Indian IT sector’s contribution to India’s GDP has grown over the years. 109876543210 IT sector’s share in India’s GDP (%) 2006 2007 2008 2009 2010 2011 2012 2013 2014 20152006 2007 2008 2009 20102011 2012 2013 2014 2015 Figure 2. Contribution of Indian IT sector to nation’s GDP One of the indicators of the strength of IT industry in India is its total revenues. According to the National Policy on Information Technology released by the Government of India, the Indian IT sector became a USD 100 billion industry in 2012. The total revenue of the Indian IT industry in 2016 stands at an estimated USD 143 billion (NASSCOM, 2016). The revenues of the Indian IT industry have grown tremendously from USD 1.25 billion in 1996 to USD 100 billion plus. The opening up of the Indian economy in 1991 created favorable conditions for the knowledge industry to thrive.
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