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Low PC sales in India could hurt IT ambitions

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CIOL Bureau
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Robin Elsham

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MUMBAI: Personal computer (PC) sales in India will rise 5-7 per cent this

year and by 15-20 per cent in 2003, a local consultancy forecast, rebounding

from a fall last year and outpacing global growth predictions.

Sales next year could expand to nearly two million machines, said a report by

Skoch Consultancy Services, an IT and telecom industry consultancy based in

Gurgaon, a suburb of Delhi. Still, that is less than the number of PCs now sold

in China in three months, posing a threat to India's ambition of dominating the

burgeoning global market for IT-enabled services.

The penetration rate of computers lags well behind China and other nations

moving, like India, to develop computer-centric service industries, and the gap

is widening. "(Sales) growth rates have been coming down since Q3 of

2000," said Skoch's managing director, Sameer Kochhar.

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Nevertheless, Skoch's forecast puts India ahead of expected global growth

rates, which leading research firm International Data Corp (IDC) puts at 3.2 per

cent this year. Skoch estimates PC sales in India fell 6.3 per cent by value and

7.0 per cent by volume in calendar 2001, due to the sharp slowdown of the

economy and the IT industry's tarnished image as a career choice.

"PCs stopped being an aspiration purchase," said Kochhar. Skoch

estimates almost 1.6 million PCs were sold in India last year, in a market worth

Rs 68.7 billion ($1.4 billion). Sales by volume surged an estimated 67 per cent

the previous year and by almost 50 per cent in 1999.

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More upbeat view



Skoch's figures show a bleaker picture of the Indian PC market than data
compiled by IDC, which estimated PC sales rose last year, though by hardly

enough to close the gap with China. IDC figures PC sales rose to 1.75 million,

from 1.6 million the previous year.

That compares to 2.15 million PCs sold during just January-March in China,

where software service and IT-enabled service companies are springing up, posing

a challenge in an industry India hopes to dominate. The global IT services

market will grow from $395 billion in 2000 to $700 billion in 2005, according to

a joint study by IDC and India's National Association of Software and Services

Companies or Nasscom.

The number of PCs sold yearly in India and those in use are educated guesses,

as heavy taxation has created a huge "grey market" for unbranded

machines sold by hundreds of assemblers. Skoch estimates the market share of

assemblers slipped to 56 per cent in 2001, from 58.6 per cent the year before.

Indian brands accounted for 16 per cent, down from 20 per cent three years

earlier.

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Less than a third of the PCs sold were foreign brands like Dell, Compaq and

Hewlett Packard. The latter two companies have since merged, forming the world's

largest PC maker. Skoch estimates there are now just 7.5 million PCs in use

throughout India, mostly in corporate and government offices.

In India's 16 largest metro areas, it estimates only 6.59 million households

can afford to buy a computer as high taxes push the cost beyond the means of

most. Duties and taxes account for 40-50 per cent of the cost of a computer in

India, versus 10-21 per cent in China, Nasscom says.

Kochhar said the average cost of a PC in India has remained around Rs 43,000

to 45,000 for the past three years, and the cheapest multimedia machine costs Rs

30,000. "India will have a grassroots IT revolution when PCs are available

for Rs 15,000," Kochhar asserted.

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