IT to be $87 billion industry in India by 2008 : McKinsey-Nasscom study

BANGALORE: A market capitalization of $225 billion, annual revenues of $87 billion and creation of 2.2 million jobs could be the achievement of the Indian information technology (IT) industry by the year 2008, a McKinsey-Nasscom study has forecast.

The study by McKinsey, commissioned by Nasscom to develop a strategy for India's IT sector for the next decade, said the country's software and services industry would earn $50 billion from exports by the year 2008. McKinsey and Company Worldwide managing director Rajat K. Gupta, released the study here on Friday.

According to the study, the market capitalization of the IT sector could reach $225 billion by 2008 from the $27.3 billion market cap of the IT companies in the Indian Stock Exchanges as on December 16. By 2008, the Indian IT sector would account for 35 per cent of India's exports and contribute about 7.5 per cent of the growth in the gross domestic product (GDP) of the country in the next one decade. The sector would generate 2.2 million jobs and attract an annual foreign direct investment of $4-5 billions, the study has predicted.

The explosion in e-businesses, the increased acceptance of outsourcing by companies in developed markets and the increasing software content in automobiles and devices such as mobile phones and home appliances will create tremendous opportunity for the Indian companies. The study says, in 2008, out of the projected revenues of $87 billion, IT services will fetch $38.5 billion, software products $19.5 billion, IT-enabled services $19 billion and e-business would account for the rest. If India is successful, the report says, the IT sector will propel the country to the centre stage of the world and make a significant contribution to economic growth over the next decade.

At least half a dozen Indian IT services companies could emerge as leading multinational players. India could also see the rise of niche category leaders in software products such as Web-based applications and services such as business intelligence and enterprise application integration. IT-enabled services such as remote call centres and back-office services will also offer good opportunities, creating almost a million new jobs over the next decade.

The Indian e-commerce start-ups will parallel their US counterparts in driving innovation and industry landscape, thus throwing up the possibility of India becoming a hub of innovation in the IT sector by 2008, the study says. According to the report, the Indian IT sector would account for 35 per cent of India's exports by 2008, an annual foreign direct investment of about $ 5 billion and contribution of over 7.5 per cent of GDP growth by the same year. McKinsey's analysis suggested that India's failure to create a world class telecom infrastructure could result in a loss of almost $23 billion in exports and 6.5 lakh jobs in 2008, NASSCOM president Dewang Mehta said.