Indian IT Market Overview, 1998-99

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.

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.

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.