The IT- BPM sector is one of the major growth catalysts for the Indian economy and contributes to approximately 9.3 percent of the country’s GDP. India’s IT – BPM industry accounts for 56 percent of the global outsourcing market. The Indian IT industry is known for its cost competitiveness and high- quality services across the world and has been instrumental in transforming the perception of India in the global economy.
India has been successful in capturing a sizeable portion of the global technology sourcing business. The Indian IT industry’s (including hardware) share in the global market stands at 7 percent. Around 60 percent of the firms in the world use India as a medium for testing services before taking their software products global. There are more than 15,000 firms in India engaged in the industry. In fact, it is one of the largest private sector employers, employing around 3.7 million jobs. As per IBEF, the IT-BPM sector of India stood at US$ 191 billion and registered y-o-y growth of 7.9 percent in 2019-20. The domestic IT-BPMindustry registered growth of 7.3 percent, while the exports of IT witnessed growth of 8.8 percent during 2019-20, as compared to previous year.
The market size of IT industry in India recorded a CAGR of 9.94 percent during 2009-10 to 2019-20. IT services had a share of more than 54 percent in the total IT sector revenues in 2018-19, with a market size of US$ 92.49 billion. The BPM sector on the other hand accounted for around 20 percent, with market size of US$ 36.2 billion.
Technology based start-ups are key growth drivers of IT & BPM sector in India with more than 4,700 start-ups currently operating in the country. India’s start-up revolution will benefit verticals such as internet of things (IoT), machine learning, artificial intelligence (AI) and health care technology. In the BPM segment, growth is being fuelled by newly emerging fields such as cloud, mobility and advanced analytics.
The IT-BPM sector of India has witnessed rapid growth owing to digital revolution round the globe. The exports of IT services witnessed CAGR of 11.11 percent during FY 09-19, increasing from US$ 25.8 billion in 2008-09 to US$ 74 billion in 2018-19. Exports from the BPM sector during the same period recorded a CAGR of 12.09 percent. The overall exports from the IT-BPM sector recorded a CAGR of 11.39 percent, increasing from from US$ 35.7 billion in 2008-09 to US$ 105 billion in 2018-19. In 2018-19, ‘IT services’ accounted for the highest share of 54.41 percent in the total export revenue from IT sector (including hardware) in the country, followed by ‘Business Process Management’ and ‘Engineering R & D and software products’ at 23 percenteach. The IT sector is dominated by 11 large players, which account for 47-50 percent of the total export revenue.
The US is the major export destination for IT exports from India, followed by the UK and these two countries together accounted for nearly 80 percent of India’s total IT exports in 2018-19, out of which the US accounted for more than 62 percent of the total IT exports from India. There is growing demand of IT exports from APAC, Latin American and Middle East countries.
FDI up to 100 percent under the automatic route is allowed in the sectors of data processing, software development and computer consultancy services, software supply services, business and management consultancy services, market research services, technical testing and analysis services.
FDI of 100 percent is permitted in B2B E-commerce, however no FDI is permitted in B2C e-commerce. As per the new guidelines on FDI in e-commerce, 100 percent FDI is permitted in marketplace model of e-commerce, under automatic route, while FDI is not permitted in inventory- based model of e-commerce.
During April 2000- March 2020, the sector attracted second highest cumulative FDI of US$ 44.91 billion which is10 percent of the total inflow into the country during the period.
The ‘Digital India’ campaign has put India on the path of becoming a digital economy and the outlook for the sector seems promising. IT megaprojects such as nationwide broadband highways, universal mobile access and public internet access program are in the pipeline under the Digital India initiative. The National Optical Fibre Network aims to connect all 2,50,000 Gram Panchayats in the country with high speed broadband.
IT solutions in the domains of education, healthcare, urban planning and financial inclusion are expected to create several opportunities in the sector. Technologies, such as telemedicine, health, remote monitoring solutions and clinical information systems, would continue to boost demand for IT service across the globe. The rollout of 5G wireless technology by telecommunication companies is also expected to bring at least US$ 10 billion of global business to Indian IT firms by 2025.
Amidst the lockdown due to Covid-19 outbreak, the IT sector is comparatively less affected as compared to other sectors of the economy. However, as per Crisil, revenue of the Indian IT services industry is expected to witness negative growth in 2020-21 due to subdued demand conditions before increasing steadily up to 2024-25,(in both exports and domestic segments) as companies are expected to intensify their focus on the digital technology space. The outlook of the industry is positive in the medium term.
The US Customs and Border Protection (CBP) site has a number of Informed Compliance Publications (ICPs) in its "What Every Member of the Trade Community Should Know About: ..." series. For more information on the enforcement of Intellectual Property Rights of software and others, click CBP Enforcement of Intellectual Property Rights
The UK government has a different set of regulations when importing from EU countries as against the non-EU members. For more information on importing from both, click Starting to Import
Also, when UK businesses buy services from outside the UK, a rule called the ‘reverse charge’ applies. The following link provides further information and helps traders calculate the charges. For more information, click VAT on Services from Abroad