The information technology and IT-enabled services (ITeS) sector faces numerous challenges including rising costs in India with wage-push inflation and rising protectionist sentiments in key markets according to the Economic Survey.

Increasing competition from other countries with incentivised low costs, infrastructure constraints with over 90 per cent of total revenue generated from seven Tier-1 locations and security related issues are some of the other challenges.

But despite this, the IT industry is in good shape giving India the image of a young and resilient global knowledge power. According to the estimates of Nasscom, India's IT and BPO sector (excluding hardware) revenues were $87.6 billion in 2011-12, generating direct employment for nearly 2.8 million persons and indirect employment of around 8.9 million. As a proportion of national GDP, IT and ITeS sector revenues have grown from 1.2 per cent in 1997-8 to an estimated 7.5 per cent in 2011-12.

Software exports in 2011-12 are estimated at $69 billion compared to $59 billion in 2010-11. While exports continue to dominate the IT-ITeS industry and constitute about 78.4 per cent of total industry revenue, the CAGR of the domestic sector has also been high at 12.8 per cent compared to the 14.2 per cent for exports during the Eleventh Five Year Plan period.

In 2012-13, according to Nasscom estimates, export revenues are expected to grow by 11-14 per cent and domestic revenues by 13-16 per cent. “These estimates are a pointer to the possibilities of making further forays into the untapped domestic sector for IT and ITeS,” the Survey notes.

tkt@thehindu.co.in

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