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The contribution of India’s IT industry to economic progress has been quite significant. The rapidly expanding socio-economic infrastructure has proved to be of great use in supporting the growth of Indian information technology industry.

Information technology in India is an industry consisting of two major components: IT Services and business process outsourcing (BPO). The sector has increased its contribution to India’s GDP from 1.2% in 1998 to 7.5% in 2012. According to NASSCOM, the sector aggregated revenues of US$100 billion in 2012, where export and domestic revenue stood at US$69.1 billion and US$31.7 billion respectively, growing by over 9%.

 The major cities that account for about nearly 90% of the sector’s exports are Bangalore, Hyderabad, Kolkata, Chennai , Trivandrum, Noida, Mumbai and Pune. Bangalore is considered to be the Silicon Valley of India because it is the leading IT exporter. Exports dominate the industry and constitute about 77% of the total industry revenue. However, the domestic market is also significant with a robust revenue growth. The industry’s share of total Indian exports (merchandise plus services) increased from less than 4% in FY1998 to about 25% in FY2012. According to Gartner, the “Top Five Indian IT Services Providers” are Tata Consultancy Services, Infosys, Cognizant, Wipro , and HCL Technologies.
The flourishing Indian economy has helped the IT sector to maintain its competitiveness in the global market. The IT and IT enabled services industry in India has recorded a growth rate of 22.4% in the last fiscal year. The total revenue from this sector was valued at 2.46 trillion Indian rupees in the fiscal year 2007. Out of this figure, the domestic IT market in India accounted for 900 billion rupees. So, the IT sector in India has played a major role in drawing foreign funds into the domestic market.
The growth and prosperity of India’s IT industry depends on some crucial factors. These factors are as follows:

India is home to a large number of IT professionals, who have the necessary skill and expertise to meet the demands and expectations of the global IT industry.

The cost of skilled Indian workforce is reasonably low compared to the developed nations. This makes the Indian IT services highly cost efficient and this is also the reason as to why the IT enabled services like business process outsourcing and knowledge process outsourcing have expanded significantly in the Indian job market.

India has a huge pool of English-speaking IT professionals. This is why the English-speaking countries like the US and the UK depend on the Indian IT industry for outsourcing their business processes.

The emergence of Indian information technology sector has brought about sea changes in the Indian job market. The IT sector of India offers a host of opportunities of employment. With IT biggies like Infosys, Cognizant, Wipro, Tata Consultancy Services, Accenture and several other IT firms operating in some of the major Indian cities, there is no dearth of job opportunities for the Indian software professionals. The IT enabled sector of India absorbs a large number of graduates from general stream in the BPO and KPO firms. All these have solved the unemployment problem of India to a great extent. The average purchasing power of the common people of India has improved substantially. The consumption spending has recorded an all-time high. The aggregate demand has increased as a result. All these have improved the gross production of goods and services in the Indian economy. So in conclusion it can be said that the growth of India’s IT industry has been instrumental in facilitating the economic progress of India.

Recent Development

The economic effect of the technologically inclined services sector in India—accounting for 40% of the country’s GDP and 30% of export earnings as of 2006, while employing only 25% of its workforce—is summarized by Sharma (2006) : “Today, Bangalore is known as the Silicon Valley of India and contributes 33% of Indian IT Exports. India’s second and third largest software companies are headquartered in Bangalore, as are many of the global SEI-CMM Level 100 Companies. “Numerous IT companies are based inMumbai, such as TCS (among India’s first and largest), Reliance, Patni, LnT Infotech, Myzornis Corporation and i-Flex.

Employment

This sector has also led to massive employment generation. The industry continues to be a net employment generator – expected to add 230,000 jobs in FY2012, thus providing direct employment to about 2.8 million, and indirectly employing 8.9 million people.Generally dominant player in the global outsourcing  sector. However, the sector continues to face challenges of competitiveness in the globalized and modern world, particularly from countries like China and Philippines.

India’s growing stature in the Information Age enabled it to form close ties with both the United States of America and the European Union. However, the recent global financial crise has deeply impacted the Indian IT companies as well as global companies. As a result hiring has dropped sharply, and employees are looking at different sectors like the financial service, telecommunications, and manufacturing industries, which have been growing phenomenally over the last few years.[9] India’s IT Services industry was born inMumbai in 1967 with the establishment of Tata Group in partnership with Burroughs.

The first software export zone SEEPZ was set up here way back in 1973, the old avatar of the modern day IT park. More than 80 percent of the country’s software exports happened out of SEEPZ, Mumbai in 1980s.

Future Outlook

The Indian IT market currently focuses on providing low cost solution in the services business of global IT. Presence of Indian companies in the product development business of global IT is very meagre, however, this number is slowly on the raise. US giants that outsource work to India, do not allocate the high end SDLC (Software Development Life Cycle) processes like requirement analysis, high level design and architectural design, although some Indian IT players have enough competency to take up and successfully complete these high level software jobs. The other prominent trend is, IT jobs, that were earlier confined to Bangalore, are slowly starting to experience a geographical diffuse into other cities like Chennai, Hyderabad and Pune. The growth is not fast paced, this, can be largely attributed to the lethargic attitude of the government in providing proper telecommunication infrastructure. The penetration levels are higher for mobile, but, the speed at which the backbone infrastructure works (network speed) and the coverage it offers are far below what other countries of the world have currently in offer.

The Indian Advantage

The above listed views might possibly work against India’s’ dream to become the biggest contributor to world IT business, but, if there is one factor that is particular only to India, and, the one that can nullify all negative factors lined up against it, would be, the volume of young, English speaking talent pool that India has got to offer. This number far exceeds, any other country can generate in the coming years. It cannot be denied that China is gearing up to reduce the English fluency gap, but, at the same time, doing it with ease like India, is a topic of discussion.

From Services to Product Orientation

The migration of Indian IT companies to mainstream product development is not happening any time in the near future, this, primarily can be attributed to the fact that was discussed in earlier section, which is, lack of innovation culture amongst the top hierarchy of the firm, and, less availability of skilled management graduates in the country. However, what might possibly happen is, global multinationals that are currently outsourcing services and back office jobs to India, might outsource more of higher level jobs in SDLC (Software Development Life Cycle) like requirement analysis and architecture design. The other opportunity is, Indian subsidiaries of global multinationals might take up significant chunk of the product development than what they are currently doing, this, however, is not happening currently because, the global IT firms are still not comfortable in working out a way to extract high end work from Indian companies.

Research and Development- The new drivers

The research in the industry was earlier concentrated towards programming technologies like Java, in the recent times, the research focus changed towards technologies like mobile computing, cloud computing and software as a service. This shift is attributed to preference of clients towards the ubiquitous computing over standalone computing and the growing demand for low cost computing solutions.