IMPACT OF BUDGET 2017 ON INDIAN IT SECTOR

by Divya Ramesh

INDIAN IT SECTOR OVERVIEW

IT sector in India can be categorized into the following segments-

  • Software products and engineering services (own software products)
  • IT services (application, website development)
  • IT enabled services (medical – transcription, BPOs, ERP)
  • IT hardware (PCs, laptops, mobile phones)

The IT industry has had a 5-year CAGR of 10.1% from 2008-2009 to 2015-2016 of which the exports markets had 12.6% and the domestic market had 3.8%. Though the export market of IT contributes to a major share of revenue, the domestic market is strengthened with a steadily rising number of mobile applications, e-commerce services and the government’s strategic push to a digital economy.

VERTICALS AND TRENDS

  • Government and BFSI verticals contribute to 35% and 30% of the domestic IT revenue respectively
  • Key drivers of the IT sector:
    • Government projects
    • BFSI
    • Telecom
  • IT infrastructure is key in digitalizing the existing government processes
  • Government initiatives such as “The Digital India” program boosts the domestic IT Industry

IMPACT OF BUDGET ON IT SECTOR

  • The 2017 union budget primarily emphasizes on a digital economy with increased cashless transactions aimed at weeding out corruption within the country. This shift towards digital payments and use of online portals for secured transactions increases the demand for cyber security and it’s applications in future.
  • Statistics for period 2013-16 show that online traffic in the e-governance portal has increased from 2060 million to 4940 million transactions accounting for a 140% increase. This calls for the need of contemporary and competent IT solutions to manage the ever-increasing data and maintain support for such services.
  • Schemes introduced such as:
    • Aadhar pay
    • Digital modes of payment for political donations
    • Removal of service tax for online ticket bookings
    • Digital payments in petrol pumps, universities, colleges, etc. lead to increase in online transaction and thus provide more opportunities for the IT sector in terms of job and revenue.
  • The Budget has proposed to improve the digital payment infrastructure and online grievance handling. This will result in a huge increase in the online traffic and data to be handled thus increasing the involvement of the IT sector services.
BUDGET SCHEMES IMPACT ON IT SECTOR
BHIM app promotional features and Aadhar pay app for cashless transactions Increases the number of cashless transactions which would increase online traffic and would require more IT services help to establish the application on a large scale. Increased web traffic also leads to the growth of cyber security.
High speed internet for Gram Panchayats Increases the connectivity thereby driving the cloud infrastructure of the IT sector. IT would also encourage the gram panchayats to buy phones improving the IT hardware sector
DigiGaon to provide education through digital technology, tele-medicine etc., To create digitally able citizens which would require IT infrastructure in terms of application and data management
Core banking support for cooperative banks and encouragement to provide core banking software Government rope in IT companies to sell core banking software strengthening the domestic IT sector

Thus, domestic IT market is expected to grow at CAGR of 10 % according to CRISIL reports and long-term growth will be achieved through e-governance initiatives of central and state government.

Though the export IT market seems to have become a bit volatile after Brexit and Trump’s assuming office as President of the US, there is a ray of hope with the disruptive Indian market steered by a number of digital initiatives taken by the Indian government.

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