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Dow Jones Business News
India IT Exports To Grow 20% Annually - Deutsche Bank
Wednesday October 16, 3:40 am ET

NEW DELHI -(Dow Jones)- A recent Deutsche Bank report predicts a surge in India's information technology service exports in the next few years despite the weak global economy and a downturn in the sector.
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The report said Indian IT service exports are expected to grow a minimum 20% annually to about US$18 billion in 2006 from US$7.8 billion in 2002. The Indian IT industry is expected to generate about $60 billion in revenue over the period.

The report said the weak global economy may actually benefit India as IT services can be bought cheaply here.

An industry report, jointly released in June by global consulting firm McKinsey & Co. and National Association of Software & Services Companies, estimated that India's IT exports will grow 34% annually up to 2008.

The Deutsche Bank study says IT services exports will be driven by an increasing trend towards outsourcing Indian IT services by foreign companies and the involvement of Indian IT firms in new segments such as development of specialized applications for individual clients' business processes.

"India fills the requirements of being a sophisticated low-cost vendor of IT services. Substantial advances in telecom infrastructure enable Indian vendors to execute projects on an offshore basis," the report said.

The report quotes the Nasscom-McKinsey study which has a survey of 50 Fortune chief information officers indicating that IT services offshoring to India is expected to rise sharply in coming years.

Another trend, noted by Deutsche Bank, is that many global majors such as Microsoft Corp. (NasdaqNM:MSFT - News) , Oracle Corp. , Intel Corp. (NasdaqNM:INTC - News) , International Business Machines Corp. (NYSE:IBM - News) and Sony Corp. have moved to set up operations in India to take advantage of low production costs.

The report says the local IT services industry has the credentials to handle larger orders.

Deutsche Bank says the business process outsourcing segment, estimated globally at $75 billion in 2001, to be the biggest income earner for the Indian IT sector. Revenue from this sector is estimated to rise by 60% to 114 billion rupees ($1=INR48.33) billion in 2003 from INR71 billion in 2002.

The report said IT service exports, expected to grow 25% this year, will add 0.4 percentage point to gross domestic product growth in 2002.

By Sonal Singh; Dow Jones Newswires

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