India’s Role in the Globalization of the IT Industry

During economic boom or bust, whether for import, domestic, or export, India has helped to drive globalization of the IT services industry; it is likely to create the second largest IT services labour pool after the United States within the next seven to eight years, as per an article published by the global research and analytics firm, Evalueserve.

In the article, Evalueserve provided the following statistics about the India’s IT services industry (which includes exports, as well as domestic IT services, engineering services, research and development services, and those related to software products):

• The Indian IT industry employed 450,000 professionals and earned USD 8.7 billion in revenue (i.e., approximately 1.75% of India’s GDP) in 2001–02.

• It employed 1,316,000 professionals and registered revenue worth USD 30.1 billion 2007–08. Since India’s GDP was approximately USD 1,050 billion during 2007–2008, the IT industry constituted approximately 2.86% of India’s GDP.

• The industry is likely to employ 3,750,000 professionals and record USD193.1 billion in revenue by 2015–16. Since India’s GDP is growing annually at 8.5% in real terms and 14% in nominal terms, this GDP is likely to be USD 2,400 billion by 2015–2016, and hence the IT industry is likely to constitute 8.05% of India’s GDP.

Consequently, if the forecasts by Evalueserve are accurate, then by 2015–2016, the number of professionals working in the IT industry will grow tenfold (from 2001–2002) and the total revenue by 22 times (in nominal terms). In other words, the industry is likely to witness significant growth even as many worry about the tough economic times ahead.

Unlike the Indian IT industry, the IT and software industry in the United States started in late 1950s, gained prominence due to mainframe computers in late 1960s and early 1970s, grew further due to the advent of personal computers in 1980s and due to the Internet that allowed organizations and individuals to be connected to each other in 1990s. Considering that all of these innovations occurred primarily in the United States, its IT industry has dominated those in other countries and continues to be significantly ahead even today.

According to Evalueserve, during 2006–07, the Unites States IT industry generated approximately USD452 billion in total revenue (i.e., domestic, as well as exports), which is almost fifteen times more than theUSD30.1 billion generated by the Indian IT industry. In 2007, the U.S. Bureau of Labor Statistics published its report, which stated that approximately 3.2 million IT professionals were employed in 2006 in different sub-sectors of the United States IT industry and forecasted that approximately 4.01 million professionals are likely to be employed in 2016.
Therefore, Evalueserve’s study concludes with the following:

• With respect to the number of professionals, the IT industry in India in 2016 is likely to be second in the world after the United States, with the latter employing between 1.25 and 1.33 times more professionals.

• Even in 2016, the IT industry in the United States is likely to generate approximately USD 810 billion in annual revenue, which would be approximately five times the revenue of the corresponding industry in India.

• The IT industries in both the U.S. and India have become inextricably linked with one another and with the rest of the world. Both the countries are likely to import, as well as export more IT services and products, at least for the next 7 to 8 years.