India’s information and communications technology (ICT) industry is rapidly growing in importance. From 1990 to 2013, the sector grew at a real average annual rate of 8.6 percent, outpacing GDP growth of 6.5 percent. ICT comprises two key subsectors: information technology-business process management (IT-BPM) and telecommunications. Total revenue for IT-BPM in India in FY 2014 was estimated to be US$118 billion, of which nearly 73 percent was exports (as per NASSCOM, Strategic review 2014: The IT-BPM sector in India, February 2014).

The country has the world’s second-largest mobile subscriber base (900 million) and the third-highest Internet subscriber base (as per NASSCOM, Strategic review 2014: The IT-BPM sector in India, February 2014). One sector that is gaining prominence is online and digital services, which partly overlaps with telecommunications - a substantial portion of online access happens via mobile devices, plus the communication service providers are the telecommunications companies themselves. The total e- commerce market (which excludes digital marketing and other support ecosystem segments) is around US$10 billion, poised to grow up to US$43 billion by 2019 (as per India Brand Equity Foundation, Telecommunication, March 2014).

The ICT sector in India is projected to grow at a strong average annual rate of 7 percent over 2014–40, due to both growing domestic and external demand (as per Oxford Economics, Global Industry Databank, September 2014). Indian IT firms could benefit if offshoring becomes more commonplace in Europe. Apart from traditional software exports, this could drive up European investments in global in-house centers in India.

As India’s economy expands, IT spending by both businesses and consumers is likely to increase. This will aid the wider ICT sector, which will also benefit from greater penetration of computing technology, smartphones, and the Internet in both urban and rural areas.

Online services including e-commerce would be a key growth driver, which will also drive growth in a large number of downstream and support industries like web and mobility as a result of enterprise software and logistics.

Another opportunity in the telecommunications sector is the rural market, where mobile penetration is currently low (40 percent). While the rural market provides tremendous potential for growth, the challenge would be to ensure relevant content, such as education, healthcare, and agriculture, is made available to the rural consumers in their local language via mobile apps.

Technological changes are inevitable in the global ICT arena, offering both challenges and opportunities for Indian firms. One example is the social, mobile, analytics, and cloud services space, which Indian firms are increasingly embracing. Moreover, even as large firms with multiple capabilities emerge, the market will increasingly accept small businesses with specialization in a particular technology, leading to greater market competitiveness. In line with the government’s “Make in India” drive opportunities in the public sector are also emerging as the Indian government focuses on creating smart cities and digital governance.

Courtsey: Deloitte, Competitiveness: Catching the Next Wave, India. November 2014.