Snapshot

Digital Excellence: The New Normal

India is projected to have 900 mn active Internet users by 2025 compared to 750 mn+ in 2020

India is emerging as the hub for “Digital Skills”. The IT industry in India is the largest employer within the private sector. In FY20, the IT industry in India employed over 4 mn personnel directly. Further, every job in the technology sector had a multiplier effect leading to the creation of 2.5 indirect jobs in the adjacent sectors. India is transforming into a digital economy with over 750 mn internet subscribers; only second to China.

Amid the lockdown, the IT & BPM sector was one of the quickest to adapt to remote work culture. During a global pandemic, in the Indian IT services industry, the hiring intent came with the benefits of work from home for more than 2 mn IT professionals working remotely.

The country's cost competitiveness in providing IT services, which is approximately 3-4 times more cost-effective than the US, continues to be its unique selling proposition in the global sourcing market.

The National Optical Fibre Network (NOFN) aims to connect all 250,000 Gram Panchayats (village council) in the country with high-speed broadband.

Indian data center industry’s capacity to double by 2023.

Indian software product industry is expected to reach $100 bn by 2025.

Up to 100% FDI is allowed in Data processing, Software development and Computer consultancy services; Software supply services; Business and management consultancy services, Market research services, Technical testing and Analysis services, under automatic route

100% FDI is permitted in B2B E-commerce.

for further details, please refer FDI Policy

  • %

    Share in India's GDP

  • > %

    Share in global outsourcing market

  • %

    Growth in export revenue

  • > %

    Share in Indian services export

Largest market share in global services sourcing industry

Third largest tech startup hub of the world

Second highest number of internet subscribers in the world

Industry Scenario

#1 sourcing destination for IT-BPM globally

The IT-BPM industry’s (excluding hardware and e-commerce) total revenue stood at $175 bn in 2019-20. The export revenue from this industry (excluding hardware and e-commerce) has been estimated at close to US$ 147 bn in 2019-20. In terms of FDI inflow, the computer software and hardware sector attract the second-highest FDI. Between April 2000 and March 2021, it attracted over US$ 71 billion.

India is one of the preferred destinations when it comes to setting up Global Capability Centres (GCCs). 50% of all the GCCs are located in India, employing more than 1mn professionals.

The Indian data center industry has attracted an investment of over $396 mn in 2020. It is estimated that per capita data consumption will hit 25GB/month by 2025.

GROWTH DRIVERS

  • Blockchain

    MEITY released a draft National Strategy on Blockchain to envisage the creation of a ‘National Level Blockchain Framework’

  • Growing Demand

    It is projected that India’s IT sector market will reach $100bn by 2025

  • The National Optical Fibre Network (NOFN)

    1,15,643 Gram Panchayats connected by optical fibre

  • Digital India Programme

    India is the 2nd Fastest Digitizing Economy Globally

  • Start-up revolution

    IoT, machine learning, artificial intelligence and healthcare

  • Artificial Intelligence

    AI/ new-age technology is to boost India's annual growth rate by 1.3 per cent by 2035

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Industrial Land Bank Portal

GIS - based map displaying available infrastructure for setting up business operations in the state.

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FAQs

Frequently
Asked Questions

What are the steps taken by Department of Electronics and Information Technology (DeitY) to support the growth of the sector?

The steps taken are as follows:
a) Infrastructure support: The Department has set up Information Technology Investment Regions (ITIRs). These regions are supported equipped with excellent infrastructure.
b) R&D promotion: 150% of expenditure incurred on in-house R&D is also available under the Income Tax Act.
In addition to the existing scheme for funding R&D projects, the department has put in place the 2 key schemes:
i) Support International Patent Protection in Electronics & IT (SIP-EIT).
ii) Multiplier Grants Scheme (MGS).
c) Tax incentives: Over the years, the Government has been taking steps to bring down the total taxation level on electronics hardware.

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What is the overview of the IT BPM sector in India and the performance of this sector in recent times?

India's IT BPM industry amounts for 56% of the global outsourcing market size. The sector has witnessed a series of investments in recent times. Ministry of Electronics and Information Technology (MEITY) has approved 67 proposals worth $ 2.5 bn; 16 venture funds have been set up and equity inflow of $ 1.8 bn in computer software and hardware sector.

You can find details regarding reforms, information on sub-sectors and government targets and initiatives in the Achievement report at the link.

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Which IT Enabled Services are considered to be part of BPO operations?

As per Central Board of Direct Taxes (CBDT) notification No. 890E dated 26 September 2000, the list of eligible IT enabled services under BPO operations considered in IBPS are as under:
i) Back office operations.
ii) Call centres.
iii) Content Development or Animation.
iv) Data Processing.
vi) Geographic information System Services.
vii) Human Resource Services.
viii) Insurance Claim processing.
ix) Legal Databases.
x) Medical Transcription.
xi) Payroll.
xii) Remote Maintenance.
xiii) Revenue Accounting.
xiv) Support Centres.
xv) Website services.

As per NASSCOM, BPO includes following processes that may be IT-enabled, do not necessitate on-shore presence and are hence, offshore-able:
1) Customer Interaction & Support (CIS)- CIS includes all forms of IT-enabled customer contact, inbound or outbound, voice or non-voice based support used to provide customer services, sales and marketing, technical support and help desk services.
2) Finance & Accounting (F&A)- F&A includes activities such as general accounting, transaction management (account receivables and payables management), corporate finance (e.g. treasury and risk management, and tax management); compliance management and statutory reporting, etc.
3) Horizontal-specific BPM services- Services that are reasonably similar across industries. Horizontal BPM services include Customer Interaction and Support (CIS), Finance and Accounting (F&A) and other related processing services, Knowledge Services, Human Resource Management (HRM), Procurement BPM, etc.
4) Human Resources Processing- HR processing services includes services that support the core HR activities plus talent management activities and associated business processes such as benefits, payroll and talent management.

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What are the Export Promotion Schemes offered by the Ministry of Technology and Information Technology (MeITY)?

The two major export promotion schemes launched under the Ministry of Electronics and Information Technology are:
 

1) Software Technology Parks (STPs): STP of India was set up as an autonomous body in 1991.
 Some of the benefits offered are:
 a) Customs duty exemption
 b) Accelerated depreciation
 c) 100% FDI permitted through automatic route.


 2) Special Economic Zone (SEZ): They were set up with an objective of providing an international competitiveness. Some of the benefits are:
 a) 100% income tax exemption on export income
 b) Duty free import. Please note that SEZ are for multiple sectors and these benefits extend to sectors other than IT BPM 

For more information, click here.

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How local entrepreneurs can participate in IBPS?

An entrepreneur can form a Consortium with a Company registered anywhere under Companies Act 1956/2013 which is able to fulfil the other eligibility criteria(s). The eligible Indian Company must have at least 26 % equity shareholder in the Consortium and commit to maintain minimum equity shareholding (26%) for at least three years.

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