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Exports have been the blue-eyed boy of the Indian IT industry till now, year
after year growing faster than its domestic counterpart. After more than a
decade, ghar ki lakshmi (domestic IT) grows more than exports and reclaims its
rightful place in the Indian IT industry firmament
Finally, the day of reckoning has come For the first time in a decade or so,
Indias domestic IT market growth has overtaken the growth of its IT exports
industry. And what a convincing difference it has been: 34 to 27. While the
domestic IT market has recorded a growth of 34%, exports grew just about 27%, is
an exact opposite of the previous year, when exports had grown 35% while the
local market had managed to expand by only 27%.
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Dissecting the Indian IT Industry (growth in $ terms) |
|
Revenue(in$bn) |
|
|
FY 08 |
FY 07 |
FY 06 |
| Domestic HW |
12.3 |
8.2 |
6.7 |
| Domestic SW |
3 |
2.1 |
1.7 |
| Domestic Services |
9.2 |
6.1 |
4.7 |
| Exports SW
& Services |
46.6 |
32.8 |
25 |
| Exports Hardware |
0.3 |
0.5 |
0.6 |
| Total |
71.5 |
49.6 |
38.7 |
| Growth |
44.00% |
28.00% |
35.00% |
Revenue in $ bn
2007-08 $1=Rs 40.4 , 2006-07 $1=Rs 45.05 |
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Notwithstanding the dollar-rupee fluctuations, the industry
shows a healthier growth rate in terms of dollars than rupees. The seeds of
globalization have truly germinated in the Indian IT industry |
Is this a switch? Is this the beginning of that great India story that
outsiders have been trying to sell to us for at least a decade, which we have
felt good about, enjoying every bit of the attention, but without actually
believing in it deep down?
Or is it just a one-time aberration, in the wake of a not-so-good year for
the exports industry, which suffered from the rupee appreciation? In any case,
the domestic growth was on a much smaller base. The exports still account for
two-third of the Indian IT industrywe will hear these arguments, and so will
you.
| Story
Behind the Numbers |
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Even if one ignores the slowing down of growth of the exports industry (the
rupee growth, as top honchos of the IT services industry would remind you
repeatedly), and its comparison with the domestic growth, on its own, the
domestic growth actually accelerated significantly, from 27% to 34%. What
is behind that accelerated pace? The skeptics would point out that the
domestic BPO industry, which grew 65%, as a major driver of that growth.
Many would even argue that it is not really IT; the same argument that many
export services firms had against getting into BPO a decade back, but what
all of them now swear by. Interestingly, TCS, one of the last IT services
firms to get into BPO, forayed into domestic BPO, bagging a huge passport
processing contract from the government. It is a matter of time before
others do the same.
But then, even without BPO, the domestic market grew 32%. That growth
came because of spectacular growths achieved by some segments. A demand for
mobility drove notebook sales by 59% while the need to save on electricity
drove many users to dump CRT monitors and go in for LCD monitors, a trend
that resulted in the non-bundled monitors market growing by 71%.
Another small segment saw magnificent growth. ATMs, which were deployed
by private and public sectors alike, grew 150% the only sub segments within
the domestic market to witness a three-figure growth. The only other sub
segment that recorded a 100% plus growth was remote infrastructure services
offered by IT services exporters.
Interestingly, after years of good growth, the basic infrastructure
segments slowed down a bit. Infrastructure areas like networking and storage
were modest, while packaged software failed to reach that inflection point.
At $24.5 bn, Indian domestic IT market is not exactly a small market.
Yet, in dollar terms, it grew 50%. In other words, it added half of itself
to it.
The first quarter of this year is over. The signs have become favorable
for the exports industry with the rupee falling against the dollar again.
So, one is not sure how the comparisons between the two will look next year.
But that comparison has more hype value. What matters is whether the
domestic industry maintains the momentum of growth.
Even though there are projections that the Indian economy will overtake
all other global economies barring China and USA in the next few years, it
will probably be too premature to ask that question here: When will the
Indian IT market overtake all other markets?
But that question will be asked. And we hope it is asked sooner than
later. |
Interestingly, all that is true. But that does not take away for the
creditable performance of Indias domestic IT market.
The legend has it that Hanuman, the Monkey God, would never remember his own
prowess until he was reminded about it by someone else. Very often, we Indians
behave the same way.
About a decade back, Goldman Sachs coined the acronym BRIC to describe the
growth geographies of Brazil, Russia, India and China. Outsiders have thronged
to India to tap the potential, even before that.
But we never believed in our own potential. Consider this. Nine Indian firms
featured in the DQ Top 20 list this year. Out of that, five have less than 10%
of their revenue coming from India.
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