IT export target of $50 bn will be delayed

IT industry association Nasscom on Tuesday said the export revenue target of $50 billion by 2010 will be delayed by 3-4 quarters due to the global economic downturn, and warned of uncertainties in the near future.

The Nasscom-McKinsey, however, presented an ambitious scenario for the Indian IT industry for the next 11 years saying the total revenue from export is expected to expand to $175 billion by 2020 and revenues from the domestic market could achieve the $50 billion mark.

"This, however, needs a concerted effort by both the industry and the government to ensure swift and sustained reforms in critical areas of education and infrastructure," Nasscom said.

On the economic scenario, the organisation said the "global economic crisis will have far-reaching and as yet uncertain impact on the industry. Near term volumes and pricing is likely to come under pressure."

Commenting on the opportunities for the industry, Som Mittal, president, Nasscom, said, "The Indian IT industry is in the midst of unprecedented times because of the current economic environment. We expect the next few quarters to be extremely challenging with companies doing everything required to effectively overcome the challenges."

Nasscom is of the view that the 2020 business landscape would be different from the one that was witnessed in the last decade as now it would be driven by global megatrends.

There are likely to be new verticals in the public sector, healthcare, media and utilities (which have adopted global sourcing only to a limited extent) along with new customer segments in the small and medium businesses.

"These new opportunities will result in export revenues of $175 billion by 2020. On the back of these megatrends the Indian domestic industry too will experience significant growth and record a four-fold increase in revenues from $12 billion in 2008 to 50 billion by 2020," it said.

"About 80 per cent of the incremental revenue growth by 2020 will be driven by opportunities outside of the current core markets, verticals and customer segments and the industry needs to redefine its value proposition to capture these," Mittal said.

The Nasscom-McKinsey report said that India has been the destination for global sourcing over the last 10 years and has garnered a 51 per cent share of the industry today. India continues to be the most competitive among 25-30 low-cost locations even today.  

"But India cannot afford to be complacent. While the industry can generate revenues as high as $375 billion in 2020, up to $150 billion of this opportunity is at risk …unless a radical transformation is achieved in its business environment, innovativeness and talent development," Nasscom said.

Nasscom said that India's market share can decline by 10 per cent by 2020 relative to other aspiring nations but with focused initiatives, the industry has the potential to achieve even more than $300 billion revenue.

 India's dominance in the industry is likely to be threatened due to various issues like shortage of employees by up to 3.5 million and ill-equipped infrastructure.

"Indian policies and the business environment have not kept pace with industry growth. The industry continues to be governed by laws that not tailored to the service sector and are not consistently applied across states," it said.

The association demanded that the government can reform policies and incentives to support the industry and ensure parity with other emerging nations.

For example, fiscal incentives can be extended beyond 2010 and domestic spending can be increased through IT budget allocations for e-governance, Nasscom said.