Contribution to Economy: Manufacturing Electronics & IT Hardware in India
Indian IT firms have delivery centres all across the world. IT & BPM industry is well diversified across verticals such as BFSI, telecom and retail. There is an increasing strategic alliance between domestic and international players to deliver solutions across the globe.
Gross Domestic Product (GDP)
The IT & BPM sector has become one of the most significant growth catalysts for the Indian economy, contributing significantly to the country’s GDP and public welfare. The IT industry accounted for 7.4% of India’s GDP in FY22, and it is expected to contribute 10% to India’s GDP by 2025.
- The electronics sector of India contributes around 3.4% of the country’s Gross Domestic Product (GDP).
- Domestic value addition is expected to grow from the current 10-15% to 25-30%.
- Creation of domestic champion companies in electronics manufacturing under the scheme will give fillip to ‘vocal for local’, while aiming for global scale.
- The government has committed nearly US$ 17 billion over the next six years across four PLI Schemes: Semiconductor and Design, Smartphones, IT Hardware and Components.
- India’s IT industries and companies are majorly located in the southern regions such as Bangalore, Hyderabad, Chennai, Visakhapatnam, Trivandrum, Mysore, Mangalore, Kochi, etc. The country’s major information technology hubs are Mumbai, Pune, Delhi, etc.
Trade (exports & imports)
India, considered a popular manufacturing hub, has grown its domestic electronics production from US$ 29 billion in 2014-15 to US$ 67 billion in 2020-21.
Export trends of IT and Electronic Sector of last few years in India
- India is among the largest IT and BPM services exporting countries and accounts for about 56% of the global outsourcing market. India’s exports of software services (excluding exports through commercial presence) are estimated to have increased by 17.2% to US$ 156.7 billion during FY 2021-22.
- BPO services accounted for nearly 84% of exports of information technology (IT) enabled services. Business process management (BPM) exports are valued at US$ 34 billion, growing 2.3% over the previous year.
- This growth in BPM is mainly driven by automation-led services in finance & accounts and human resources, increased adoption of robotic process automation (RPA) and analytics.
- India’s export of electronic goods stood at US$ 2,009.07 million in September 2022, an increase of 71.99% YoY.
- Mobile phones, IT hardware (laptops, tablets), consumer electronics (TV and audio), industrial electronics and auto electronics are key export products in this sector.
- As per the Ministry of Electronics & IT vision, India’s electronics industry exports are expected to increase to US$ 120 billion by 2026.
Export Destinations
- The USA, UK and EU remain the major markets for the IT software and services exports, accounting for 62%, 17% and 11% of the total IT-ITeS exports respectively, however, there are new challenges surfacing in these traditional geographies.
- Demands from Asia Pacific (APAC), Latin America and Middle East Asia is growing and new opportunities are emerging for expanding in continental Europe, Japan, China and Africa.
Employment
- This sector is the biggest employment generator and has spawned the mushrooming of several ancillary industries such as transportation, real estate and catering, Security, Housekeeping etc. Direct employment in the IT services and BPO/ITeS segment is estimated to reach 5.1million in FY 2021-2022 (E) with an addition of 4,45,000 people (consisting of ~ 36 percent women employees).
- Indirect job creation is estimated to be over 12.0 million.
- The programme seeks to boost domestic manufacturing and attract large investments in the value chain of these IT hardware products.
- In FY22, the top three Indian IT companies, TCS, Wipro and Infosys, are expected to offer 1.05 lakh job opportunities due to the increasing demand for talent and skill.
Market demand and supply
- The global consumer electronics market size was USD 729.11 billion in 2019. The market is projected to grow from USD 689.45 billion in 2020 to USD 989.37 billion in 2027
- The Global Impact of covid 19 has been unpredented and staggering with consumer electronics witnessing a negative demand shock across all regions amid the pandemic.
- Based on our analysis the market will exhibit a decline of minus 5.4% in 2020 the market is projected to grow from USD 689.45 million in 2022 to USD 989.37 billion in 2027 at a CAGR of 5.3% in the 2020 to 2027 period
- Electronic devices and Technology are highly penetrated among a wide range of Technical consumer goods in households on one side television sets is the wider screen size are receiving popularity where is one other side the Miniaturization of electrical component is on the rise.
- Going forward, development of smart cities, innovations in electronic products such as 4G and 5G, growing demand for wireless audio devices and smart TVs, increase use of electronic devices, rising demand for electronic components in display devices, increasing adoption of internet of things (IoT) and increasing demand for smart home products are expected to drive the market.
- Shortage in semiconductors, changing regulations, and the coronavirus pandemic are major factors that could hinder the growth of the electronic products market in the future.
According to National Association of Software and Service Companies (Nasscom), the Indian IT industry’s revenue touched US$ 227 billion in FY22, a 15.5% YoY growth. Indian software product industry is expected to reach US$ 100 billion by 2025. Indian companies are focusing on investing internationally to expand their global footprint and enhance their global delivery centres.
The data annotation market in India stood at US$ 250 million in FY20, of which the US market contributed 60% to the overall value. The market is expected to reach US$ 7 billion by 2030 due to accelerated domestic demand for AI.
India is the topmost offshoring destination for IT companies across the world. Having proven its capabilities in delivering both on-shore and off-shore services to global clients, emerging technologies now offer an entire new gamut of opportunities for top IT firms in India. In the Union Budget 2022-23, the allocation for IT and telecom sector stood at Rs. 88,567.57 crore (US$ 11.58 billion).
Spending on information technology in India is expected to reach US$ 144 billion in 2023. By 2026, widespread cloud utilisation can provide employment opportunities to 14 million people and add US$ 380 billion to India’s GDP.
Kaushal Sharma
Kaushal Sharma is a Research Intern at Tatvita-Analysts. He is pursuing Masters in Economics from Symbiosis College.
