IT growth triggers higher levels of spending

NEW DELHI: Nasscom today released the findings of a study on the cross sectional view of the multiplier-effects on income generation and job creation induced by the Indian IT/ ITES sector industry.

The study undertaken by CRISIL, a Standard & Poor’s company, named, The Rising Tide – Output and Employment Linkages of IT-ITES quantifies the economic impact of the IT-ITES activity in the country.

The survey took a detailed cross-sectional view of the multiplier effects on income generation and job creation induced by the sector, Kiran Karnik, president of Nasscom, said. “The findings of the study have reinforced earlier beliefs with quantified measures of the wider economic impacts of the growth in the IT-ITES sector.”

He further said that the analysis also assessed the impact of two key economic concerns: the continued wage inflation and the removal of STPI benefits, on the IT sector’s medium term performance.

Earn more, spend more

“Factors like development of new satellite townships, rapid growth in social infrastructure, supported by the substantial disposable incomes amongst the professionals employed and the relatively young demographic profile of the average IT-ITES professional further accentuates this impact as he/she earns a high level of disposable income at a younger age and has lower liabilities leading to higher levels of spending. This contributes to significant investment in creating supporting infrastructure and has induced high levels of consumption spending across the country. This, in turn, has resulted in generating substantial indirect employment and in creating additional income for a vast cross-section of society,” he added.

The findings indicated a strong output effect in the sector, with every Re 1 spent by the IT-ITES sector (on domestically sourced goods and services) translated into a total output of Rs 2 in the economy, which was driven by derived demand from firm level spends on operating expenses, capital expenditure and consumption spending by professionals.

More jobs

The study also brought to light the fact that for every single job created in the IT-ITES sector, four additional jobs were created in the rest of the economy. The findings said nearly fourth of the workforce employed by the service providers were less educated or sometimes practically educated.

On conducting such a study, Dr Subir Gokaran, executive director and chief economist of CRISIL, said the study was an opportunity to put perceptions about the significant backward linkages of IT-ITES to test.

“We used rigorous methodology, combining conventional Input-Output analysis with three primary surveys to arrive at our findings. By doing this, we believe we have laid a firm quantitative foundation for future debates on the significance of the sector. Of course, there is much to be done on forward linkages and we look forward to researching this dimension as well,” he added.

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