NEW DELHI (Reuters) - India's business services and information technology exports are expected to surge more than 25 percent a year to US$60 billion by 2010, an industry report forecasts, but the country's pin-up industry faces tough hurdles.
The projection, in a study released on Monday by consultancy McKinsey and India's IT association, Nasscom, is roughly in line with the 30 percent annual rise in the past three years and earlier forecasts of US$50 billion in exports by end-2008.
At US$60 billion, India would have almost half the world's IT and business process outsourcing (BPO) exports by 2010 and could add an extra US$15 billion-US$20 billion over five to 10 years from 2005 through innovation and technological advances, the report said.
While India will remain the biggest pool of low-cost global knowledge workers for the foreseeable future, with more than double the combined total in its nearest rivals, China and Russia, it faces a shortfall of 500,000 people by 2010 unless it steps up training.
"The reality is that this shortfall can be fairly easily met by industry," McKinsey's Noshir Kaka told reporters in New Delhi, citing India's 2.5 million graduates a year.
IT/BPO sector jobs will grow from 700,000 to 2.3 million and indirect employment from 2.5 million to 6.5 million — adding more work than the communist-backed Congress government's four biggest labour creation programs, the report said.
A bigger hurdle is India's creaking infrastructure, where even leading cities such as Bangalore, Mumbai and New Delhi have massive problems with power, transport and other basic services.
McKinsey's Jayant Sinha said the government and business must go on "a war-footing" to solve the infrastructure crisis, which economists say is also a major brake on broader economic growth.
To get around this, the report urges the creation of 10-12 new townships or satellite cities across the country, with their own airports, roads, real estate development and other services.
It also proposes special education zones and school reforms.
McKinsey and Nasscom estimate barely 10 percent of the potential US$300-billion-a-year world market for global offshoring is being tapped, but they expect radical changes by 2015.
"We have no doubt that this industry will become the largest export-led industry in the world, rivalling oil from Saudi Arabia or automobiles from Japan," Kaka said.
McKinsey and Nasscom publish their outlook for India's fastest growing industry every three years. This is their third.
They see the sector's export share of gross domestic product — itself growing about 8 percent a year — more than doubling from 3 percent to 7 percent by 2010.
The report said the face of the IT/BPO sector will change as its traditional engines of growth, such as application and software development and research and development, slow and customers expect more innovation and value-added services.
"Looking forward, the more traditional IT outsourcing lines such as hardware and software maintenance, network administration and help desk services will account for 45 percent of the total addressable market for offshoring and are likely to drive the next wave of growth," it said.
This will be focused in areas such as retail banking, human resources, accounting and finance.
Indian IT exports to hit US$60bln in five years: study
By Terry Friel on Dec 13, 2005 9:30AM
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