Indian IT Market Overview, 1998-99

By : |June 23, 1999 0

IT industry sustains growth in 1998-99
Three years of economic anemia are enough to weaken any industry. While the continuing
trough in the economic graph has also affected the Indian Information Technology industry,
it has shown remarkable resilience against all odds. Despite a small dip in the overall
growth rate in 1998-99, IT remains one of the fastest growing industries in the country.

Economic Indicators and Domestic IT Market Growth

Indicators 1995-96 1996-97 1997-98 1998-99
GDP at factor
cost (% growth)*
7.6% 7.8% 5.0% 5.8%
Index of
industrial production (%growth)*
12.7% 5.6% 6.6% 4.0%
Exports (%
growth)*
21.1% 5.2% 1.6% -1.1%
Domestic IT
market (% growth)^
39.1% 19.8% 18.0% 17.8%
Source: * Centre for Monitoring
Indian Economy, May 1999

IDC (India) Limited, 1999

Fiscal 1998-99 was characterised by the Indian economy
going through its worst phase ever; as industrial growth reached its nadir and exports
growth declined considerably over the previous year. Exports seemed to have got caught in
the whirlwind of global recession and heavy devaluation of some Asian currencies, which
made exports from India less attractive.

Nevertheless, the IT industry showed only a marginal dip in the annual growth rate from
18 percent in 1997-98 to 17.8 percent in 1998-99; a clear indication of the sustaining
power of the industry.

Accelerators and Inhibitors, 1998-99

Accelerators

Inhibitors

  • Home, Small Office and Small Business segments
  • Political uncertainty
  • IT spending by Banks and Financial Institutions
  • Industrial and exports slowdown
  • Reduction in internet access charges leading to rapid proliferation of internet
  • Delays in formulating and implementing the new Telecom Policy
  • Lack of investment in infrastructure projects
  • High inflation in the second half of 1998
  • Economic sanctions following nuclear tests
Source: IDC (India) Limited, 1999

The performance of the IT market has, until recently, been
strongly dependent on economic and political factors, since corporate and government
spending accounted for a major share of the IT market. Furthermore, these are the segments
that tend to be affected by economic downturn and political turmoil in any country much
earlier than the other segments.

IDC believes that in the future, the performance of the Indian IT industry may not be
as closely linked to the overall economic performance, as it has been in the past. Strong
growth in the Home segment, together with the realisation among corporates that IT is a
powerful strategic initiative, would bring about this trend.

Total IT Market ,1997-98 and 1998-99
(Rs. Crore)

Segment 1997-98 1998-99 Growth (%)
Hardware 5744.1 6683.2 16.3%
Packaged
Software
1171.0 1334.9 14.0%
Services 2770.0 3325.6 20.1%
Others* 1120.0 1380.6 23.3%
Total IT
Market
10805.1 12724.2 17.8%
* includes consumables and
individual training
Source: IDC (India) Limited, 1999
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