India’s GDP and Information Technology
Group 5 – Div A
India’s GDP 3
IT and India 4
IT and its Contribution to GDP 4
Investments in the IT sector in India 5
Education & its impact on GDP 8
India’s GDP has grown steadily since 1991, after the Prime Minister Narasimha Rao initiated the economic liberalization of 1991. The reform reduced tariffs and interest rates, terminated public monopolies and allowed autocratic approval of FDI ( Foreign Direct Investments) in many sectors.
Fig 1: India – Gross Domestic Product
The GDP of India is ...view middle of the document...
In 2010-11, no. of such people were 2.5 million (directly), 8.5 million (indirect job creation).
The revenue generated from IT hardware/software & services was 88.1 billion in 2010-11 and expected to rise to 193.1 billion by 2015-16.
Since India's GDP is growing annually at 8.5 per cent in real terms and 14 per cent in nominal terms, this GDP is likely to be $2,400 billion by 2015-16, and hence the IT industry is likely to constitute 8.05 per cent of the total GDP.
Investments in the IT sector in India
A few of the major multi-million dollar investments in the next few years are listed below:
1. An agreement between HCL Technologies & News Corp. Deal is estimated at $200-$250 million
2. An agreement between HCL Technologies & Meggitt estimated at $550 million
3. Walmart investing in partnership with three Indian IT giants in a deal worth $600 million
4. Mahindra Satyam & Japan’s SBI Holdings To Set Up $50M Technology Investment Fund
5. IBM to invest in a $ 20 BILLION acquisition drive in the next 5 years in India and globally
6. Essar's BPO arm Aegis looking for investments & acquisitions to reach $1 Billion mark
7. EMC Corporation to touch $2 billion by 2014
A recent report released by (India Brand Equity foundation) states that $10,705 million are invested as FDI in IT sector between 2000 and 2011.
A $522 million investment by Cognizant, Globsyn Business School and Polaris software lab are planned by 2014 to create additional software and training facilities in regions designated as special economic zones in Chennai, Pune, Coimbatore and Kolkata.
What is likely to be more important to GDP growth in India in the next 20 years, rapid improvements in IT adoption, or improvements in basic levels of literacy and education in India?
IT sector has definitely been a major contributor in the GDP growth of India since 2000. However the bigger questions would be –
* Will growth in IT ensure enough employment to the people of India so as to significantly impact the GDP growth of India?
* Can IT sector sustain the same growth rate for the next 20 years and beyond?
The answer to the above questions is most likely to be NO.
Fig 3: Indian Labour Force sector-wise
The data shows that the agricultural sector employs about 52% of the total 478.3 million strong labor force of India; with IT sector employing only about 2.3% of man-power. In order to make to significant contribution to the employment generated, the IT industry will have to create around 100 million jobs over the next 20 years, which is not feasible. This clearly shows that IT cannot employ enough people to raise overall GDP growth. Additionally, the industry has grown past its nascent stage and has graduated from being a low value long term services provider offering cost and labour arbitrage to provider of high value services. The IT sector in India also faces increased competition from other low cost destinations like Philippines and China. Thus...