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SECTOR PROFILE
WHY INDIA?01
CHAMPION SECTORS02
PROFILE03
INVESTMENT OPPORTUNITIES04
BUSINESS & REGULATORYENVIRONMENT IN INDIA
05
WHY INDIA?01
ADVANTAGE INDIA
World’s largest democracy with
1.3 billionpeople
Expertise acrossa spectrum of
services
Largecompetitively-priced skilled
talent pool
Large andgrowing domestic
consumermarket
Demonstratedcapability to deliver
high-quality,cost-effective
solutions
Integrated taxstructure
Enablingbusiness
environment
Focus oninfrastructuredevelopment
Access totechnology
INDIA – A FAVORED INVESTMENT DESTINATION
Fastestgrowing major economy in the world in 2018 and 2019
6th largest economy in the world by nominal GDP and 3rd largest economy globally by PPP
1st rankglobally in inward greenfield FDI inflows in 2016
India ranks 8thin global services exports accounting for 3.4% ofworld trade incommercialservices
Services,
57%
Automobile, 5%
Pharma, 4%
Power, 4%
Others,
26%
Chemicals, 4%
Agriculture17%
Industry22%
Services61%
6.1
60.1Mauritius, 34%
Singapore, 17%
Japan, 8%
%UK, 7%
USA, 6%
Netherlands, 6%
Others,22%
India’s GDP is likely to touch US$ 5 trillion by 2025
2.6
4.7
2017 2023
GDP in current prices (US$ Trillion) GVA share of sectors in FY18
43.2
163.1
27.8
95.7
2004-05 2016-17
Exports
Imports
Services Trade (US$ Billion)
14%
10%
1%
1%74%
Category-wise Services Export (2016-17, % share)
17%
15%
1%1%
66% Travel
Transport
Insurance
G.n.i.e
Miscellaneous*
Category-wise Services Import(2016-17, % share)
Gross Foreign Inflows-FDI (US$ Billion) Top FDI source countries (% share in inflows- Apr’00 to Mar’17)
G.n.i.e- Government not included elsewhere; * includes software, business, financial and communication services
20
04
-05
20
05
-06
20
06
-07
20
07
-08
20
08
-09
20
09
-10
20
10
-11
20
11
-12
20
12
-13
20
13
-14
20
14
-15
20
15
-16
20
16
-17
Sector-wise FDI inflows (% share in inflows-Apr ‘00 to Mar’17)
75
60
45
30
15
0
Source: IMF, FDi intelligence report 2017, RBI, WTO
GROWTH ENABLERS
Growing domestic consumer base Large, young human capital base
Rising disposable income and urbanization More than 800 million people under the age of 34 years
Urb
an p
op
ula
tio
n (%
of
tota
l)
Pe
r-c
ap
ita I
nc
om
e (
INR
)
18,523
61,855
27.8
31.270000
60000
50000
40000
30000
20000
10000
0
32.0
31.0
30.0
29.0
28.0
27.0
26.0
2001 2011
Urban Population and Per-capita Income
Per capita income Urban population
Per-capita Income data pertains to 2001-02 and 2011-12Source: Census 2011, MOSPI
Size of the workforce (millions)*
37
35
27
1400
1200
1000
800
600
400
200
0
Korea Thailand Japan US Europe China India
2015 2025 (Projected) 2050 (Projected)
49
47
36 77
71
55
213
217
235
492
466
405
1008
984
795 860
985
1145
* Population aged 15-64 yearsSource: United Nations population statistics
CHAMPIONSECTORS
02
Transport
& Logistics Healthcare Accounting
& Finance
Construction
& Related
Engineering
Services
Media &
Entertainment
Education
Services Financial
Services
Environmental
Services
Tourism
& Hospitality
IT & ITeS Legal
Services
Communication
Services
((( (((
INVESTMENT ANNOUNCEMENTS
Value of PE-VC investments in IT & ITeS sector (in US$ bn)
1.8 1.50.7 0.8
2.1
3.2
2.3
6.0
9.0
1.6
5.1CAGR- 11.2%
2007 2008 2009 2010 2011 2012 2013 2014 20152006 2016
Barclays
Barclay Technologies Centre India Ltd, an offshore unit of the London-based financial services firm, is planning to add 100,000 sq. ft in Pune, where it currently operates.
Reliance
Reliance Industries Ltd (RIL) plans to set up a USD 773.1 mn fund, under the name of Jio Digital India Startup Fund, to invest in technology based startups.
Apple
Apple Inc. has set up its first technology development centre outside the US in Hyderabad.
Cargill
Cargill Inc. has set up its largest Global Innovation Centre (GIC) in India, which will do over 60% of its global financial work.
PROFILE:IT & ITES
03
GLOBAL SCENARIO
2017
2018 (P)
2019 (P)
Global Total IT spending (USD Billion)
3,527
3,683
3,784
(2.8%)
(6.2%)
(3.8%)
2017
2018 (P)
2019 (P)
Global spending on IT services (USD Billion)
933
1,003
1,048
(4.6%)
(7.4%)
(4.4%)
Note: P: Projections. Numbers in brackets are the y-o-y% growth Source: Gartner, April 2018
The global IT spending is projected to
total US$ 3.7 trillion in 2018,
registering an increase of 6.2% from
2017 as per Gartner estimates.
The worldwide IT services market will
reach US$ 1,003 billion in 2018,
growth by 7.4% over its 2017 levels.
26 billion internet connected devices
and over 4 billion internet users by
2020.
In 2016, IP traffic was 1.1 Zeta Bytes
(over 1 trillion GB), by 2020 IP traffic is
expected to touch 2.3 ZB.
INDIAN SCENARIO
Sector size ofIT & ITeS industry
IT & ITeS sector as a share of India’s GDP
Employment growth (Total direct employment in IT & ITeS)
$140 billion
$151.5 billion
5.8%
7.7%
FY09 FY17
3.273.97
FY14 FY18 (P)
CAGR- 12%
( in millions)
• IT&ITeS industry revenue is expected to grow over 7% in FY17 on y-o-y basis
• Direct employment in IT&ITeS sector is expected to grow by about 4% in FY18.
• One of the largest job provider and creator in the organized industry segment
• Contribution to India’s GDP has grown from 5.8% in FY09 to 7.7% in FY17
• Important sector for India’s GDP
Source: Department of Electronics & IT Annual Report, 2017 and NASSCOM
2016 2017
INDIA’S VALUE PROPOSITION IN THE SECTOR
IT industry has more than 16000 firms; of which 1000+ are large firms with over 50 delivery locations in India
IT & ITeS is the largest private sector employer – delivering 3.7 million jobs
IT & ITeS companies have set up over 1000 global delivery centers in over 200 cities globally
More than 15 Global In-House Centers (GICs) have been added in India
Indian internet industry expected to double, reachUS$ 250 billion by 2020
India’s digital economy is projected to reach US$ 1 trillion by 2022, with potential to touch US$ 4 trillion.
India is the 3rd largest tech based start-up hub in the world with over 4200 start-ups in the country
100+ Centers of Excellence focusing on Block chain, IoT and Analytics
Favorable government policies and incentives facilitate investments
India’s IT & ITeS industry accounts for 56% of the
global outsourcing market size
Rapidly growing urban infrastructure has fostered several IT centers in India
Presence of skilled manpower- India is home
to a large number of IT professionals
Source: Department of Electronics & IT Annual Report, 2017 and Make in India
SEGMENTS OF INDIA’S IT & ITES SECTOR
IT & ITeS*
IT services
Business Process Management (BPM)
Software products & engineering services Hardware
Note: * e-commerce has not been included as a part of IT & ITeS sector
SECTOR PROFILE
• The market size of India’s IT & ITeS industry is expected to grow over 7% and reach US$ 151.5 billion in FY18 compared toUS$ 140 billion in FY17.
• As per NASSCOM estimates, IT&ITeS industry is expected to reach US$ 350 billion by 2025.
The lion share of IT & ITeS industry in India comprises of IT Services followed by Business Process Management.
19.0 21.0 21.7 24.0 26.5
87.397.8
107.8116.0
125.0
FY14 FY15 FY16 FY17 (E ) FY18 (P)
Market size of IT industry (USD Billion)
Domestic Export
CAGR: 7.3%
Source: NASSCOM
IT Services53%
Business Process
Management19%
Software products
and engineering
services19%
Hardware9%
Sector wise break-up of IT industry (USD Billion, FY17)
E- Estimate, P-ProjectionsSource: Department of Electronics & IT Annual Report, 2017
EXPORT POTENTIAL
49.2 55.3 61.0 66.0 71.0
20.422.5
24.425.0
27.517.7
20.022.4
25.026.5
FY14 FY15 FY16 FY17 FY18 (P)
Growth in Export Revenue (US$ billion)
IT Services BPM Software products & engineering services
IT & ITeS exports are projected to reach US$ 125 billion in FY18, showing a 7 per cent growth on y-o-y basis.
Exports of IT Services is the fastest growing segment within the Indian IT & ITeS export basket, accounting for 56.4 per cent of total IT&ITeS exports in the year FY17.
Disruptive technologies such as SMAC (Social media, mobility, analytics and cloud), artificial intelligence, embedded systems etc. offer new avenues for exports.
IT Services, 56.4%
BPM, 22.2%
Software products
& engineering services, 21.4%
Sector wise breakup of Export Revenue in FY17 (US$ billion)
Source: Department of Electronics & IT Annual Report, 2017 and NASSCOM
GEOGRAPHICAL SPREAD OF IT EXPORTS
US, 62%
UK, 17%
Continental Europe, 11%
Asia, 8%
Rest of the World, 2%
Distribution of export revenues across geographies (FY17)
80
60
40
20
0
FY15 FY16 FY15 FY16 FY15 FY16 FY15 FY16 FY15 FY16
US
UKEurope (ex-UK) Asia Rest of the
World
Geographic breakup of export revenue ofIT & ITeS sector (US$ bn)
USA, UK and EU accounted for 90% of the total IT & ITeS exports in FY17.
Consistent service has helped differentiate the Indian IT & ITeS sector from global competition
Being a low cost exporter of IT services, India has the potential of expanding to unexplored geographies.
Demand from Asia Pacific, Latin America and Middle East Asia is growing and new opportunities are emerging from continental Europe, Japan, China and Africa.
Source: NASSCOM and Department of Electronics & IT Annual Report, 2017
FDI FLOWS IN THE SECTOR
0.9 0.8 0.80.5
1.1
2.2
6.0
3.7
5.2
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18*
FDI Inflows in Computer Software & Hardware (US$ Bn)
8.7
6.9
2.3
Mauritius Singapore US
Top 3 source countries for FDI inflows in computer software & hardware (Jan’00-Dec’16, US$ Bn)
From Apr 2000-Dec 2017, total FDI inflows into the Computer Software & Hardware sector stood atUS$ 29.8 billion, accounted for 8% of the total inflows.
Three countries - Mauritius, Singapore and US account for 78% of the total FDI inflows for Computer Software & Hardware.
FDI up to 100% under the automatic route is allowed in data processing, software development & computer consultancy services and software supply services.
The third highest sector attracting FDI inflows.
CAGR: 24.5%
Note: * Apr-Dec 2017Source: DIPP, Electronics and IT Sector Achievement Report, DIPP, 2016
EMPLOYMENT POTENTIAL
0.43
1.96
3.86
FY01 FY08 FY17 FY25 (P)
Direct employment in IT&ITeS sector (in millions)
Art+Other graduates, 37%
4 year Engg degree, 16%
Commerce graduates, 14%
Science graduates,12%
Other graduates,9%
Post graduates,6%
3 year Enggdiploma/MCA, 6%
Available talent output, 2013
3.5 million new employment since 2001.
Expected to add 2.5-3.5 million new jobs by 2025 as per NASSCOM.
As per a study by NSDC, about one-fourth of the available talent pool can be directly employed in the sector which includes engineering and MCA graduates.
Total indirect employment generated by sector: Over 10.0 million.
The sector also plays a key role in enabling higher levels of employment in other verticals.
6.5-7.0
Source: Department of Electronics & IT Annual Report, 2017 and NSDC Report
GROWTH ENABLERS
Global growthin IT servicesspending
• The global IT spending is seen at
US$ 3.5 trillion in 2017 with IT
services market expected to touch
$938 billion
• Revival in demand for IT services
from US and Europe
Domesticgrowth
• Digital India (US$ 1 trillion dollar
opportunity)
• India stack: Technology for
1.2 billion (Aadhaar, UPI, e-KYC,
eSign)
• Growing internet penetration and
smart devices (US$ 4.3 trillion
connected life opportunity)
• The SMAC (social, mobility,
analytics, cloud) market is
expected to grow to US$ 225
billion by 2020.
Policysupport
• Policy measures such as Make in
India, Digital India, Skill India,
Start-up India are expected to
boost IT enabled services
• Online procurement through
Government e-Market Place
• Tax holidays for Software
Technology Parks of India (STPI)
and SEZs
Infrastructure& NewTechnologies
• Robust IT infrastructure across
various cities such as Bengaluru
and Hyderabad
• Mainstream adoption of frontier
technologies such as Artificial
Intelligence (AI), machine learning,
robotics, automation, virtual reality.
• The National Optical Fibre Network
(NOFN) is being laid down to
connect all the 0.25 million gram
panchayats in the country
MAJOR POLICYINITIATIVES
TO BOOST SECTOR
Make in India
Ease of Doing Business
Digital India
Skill India
Startup India
Smart Cities
POLICY MEASURES
Several measures introduced in last 1–2 years to boost the sector’s growth potential
The government giving shape to Rs 3,700 crore plan for covering nearly 5.5 lakh
villages with Wi-Fi facility by March 2019.
Digital India and Smart Cities has put India on the path of becoming a digital economy.
Centre of Excellence on Internet of Things (IoT) to
promote IoT ecosystem set up in Bengaluru.
The National Optical Fibre Network (NOFN) to connect
all the 250,000 gram panchayats.
India BPO Promotion Scheme (IBPS) launched for employment generation and balanced growth of IT & ITeS
in each state.
Tax rate on royalty and fee for technical service payable
to non-residents reduced from 25% to 10%.
Government’s IT/ITeS Sector Skill Council (SSC) is
facilitating the expansion of skill workforce with the help
of NASSCOM.
500,000 Wi-Fi hotspots to provide internet connectivity
to over 5 million rural citizens.
IT & ITES CLUSTERS IN INDIA
Key IT & ITeS clusters account for a considerable proportion of products & services, employment and exports of Indian IT industry.
These clusters are the premier choice for outsourcing IT services by MNCs and also for locating their own Global In-house Centers (GICs).
Bangalore will become the world’s largest IT cluster by 2020*.
Note: * As per Karnataka government source Source: InvestIndia
AccentureInfosysIBMTCSWipro
HCLTechnologiesTech MahindraOracle IndiaAdobe India
Delhi NCR
Pune
TCSInfosys TechnologiesTata TechnologiesWiproTech MahindraCapgemini
Bengaluru
Texas InstrumentsSonyTCSOracleWiproCapgeminiMindtree
Chennai
TCSWiproInfosysHCLHPAccenture
Hyderabad
MicrosoftIBMMotorolaOracleBaanWiproInfosysAccenture
Delhi
GhaziabadNoidaGurugram
Nashik
MumbaiPune
Hubli
Mangaloge Bengalure
Mysore
SalemChennai
Coimbatore
Maduria
Visakhapatnam
Hyderabad(HITECH City)
MAJOR IT & ITES COMPANIES IN INDIA
Note : Number in brackets is the Market Capitalisation as on 31st March, 2018Source: Prowess database
Top 10 IT & ITes companies as per Market Capitalization
Tata Consultancy Service
(US$83.9 billion)
Infosys (US$38.1 billion)
HCL Technologies (US$20.8 billion)
Wipro (US$19.6 billion)
Tech Mahindra (US$9.6 billion)
Mindtree (US$2.0 billion)
Mphasis (US$2.5 billion)
Larsen & Toubro Infotech
(US$3.5 billion)
Vakrangee (US$3.6 billion)
Oracle Financial Services Software
(US$4.9 billion)
1 2 3 4 5
6 7 8 9 10
SEGMENTS OF IT & ITES SECTOR - IT SERVICES
Note: E- estimateSource: Department of Electronics & IT Annual Report, 2017
663 727.2
816.6
895.6
1005.0
2012-13 2013-14 2014-15 2015-16 2016-17 (E )
Domestic revenue from IT services (Rs billion)
CAGR8.7%
42.9
49.2
55.3
61.0
66.0
2012-13 2013-14 2014-15 2015-16 2016-17 (E )
Export revenue from IT services (US$ billion)
CAGR9.0%
• Market size of IT services estimated at Rs 1005.0 billion in 2016-17, registering growth of 12.2 per cent as per NASSCOM estimates. The market size grew at a CAGR of 8.7% over the period FY13-FY17
• Export revenue from IT services stood at US$61 billion in 2015-16, expected to touch US$66.0 billion in 2016-17, which is 8.2% growth. This moderation is mainly due to global slowdown.
• Banking, Financial services and Insurance (BFSI) continues to be the major vertical of IT services.
• IT services is the largest segment of IT&ITeS sector in India, having 53% share in total IT&ITeS sector’s revenue in FY17.
Sector overview
SEGMENTS OF IT & ITES SECTOR - BUSINESS PROCESS MANAGEMENT
Note: E- estimate,Source: Department of Electronics & IT Annual Report, 2017
175.0
195.9
214.9
233.6
268.0
2012-13 2013-14 2014-15 2015-16 2016-17 (E )
Domestic revenue from BPM (Rs billion)
CAGR8.9%
18.3
20.4
22.5
24.4 26.0
2012-13 2013-14 2014-15 2015-16 2016-17 (E )
Export revenue from BPM (US$ billion)
CAGR7.3%
• As per NASSCOM estimates, the market size of BPM segment is estimated at Rs 268.0 billion in 2016-17, registering impressive growth of 14.7 per cent. The market size grew at CAGR of 8.9% over the period FY13-FY17.
• Export revenue from BPM stood at US$ 24.4 billion in 2015-16,expected to touch US$ 26.0 billion in 2016-17, which is 6.6% growth. This is a moderation as compared to previous few years growth.
• BPM segment had 19% share in Indian IT & ITeS sector revenues in FY17.
• India remains the world’s top sourcing destination in 2017-18 with a share of about 55%.
Sector overview
SEGMENTS OF IT & ITES SECTOR - SOFTWARE PRODUCTS & ENGINEERING SERVICES
Note: E- estimate,Source: Department of Electronics & IT Annual Report, 2017
205.0 224.7
257.9 279.1
335.0
2012-13 2013-14 2014-15 2015-16 2016-17 (E )
Domestic revenue from software products & engineering services (Rs Billion)
CAGR10.3%
15.3
17.7
20.0
22.4
25.0
2012-13 2013-14 2014-15 2015-16 2016-17 (E )
Export revenue from software products & engineering services (US$ Billion)
CAGR10.3%
• Market size of Software products & Engineering Services (SPES) segment estimated at Rs 335.0 billion in 2016-17 as per NASSCOM estimates, logging robust growth of 20.0 per cent. The market size grew at CAGR of 10.3% over the period FY13-FY17.
• Export revenue from SPES stood at US$ 22.4 billion in 2015-16, expected to touch US$ 25.0 billion in 2016-17 which is 11.6% growth.
• SPES segment had 19% share in Indian IT & ITeS sector revenues in FY17.
Sector overview
INVESTMENTOPPORTUNITIES
04
INVESTMENT OPPORTUNITIES
{Established globalleadership position
• Dominant #1 in global services sourcing industry, with a share of 56%
• Nearly all international giants in the IT & ITeS space have a significant presence in India
• Industry forecast to grow from US$ 167 billion in 2017-18 to US$ 350 billion by 2025
{Demonstrated capabilityin delivering high-quality,
cost-effective solutions
• IT services estimated to be 3-4 times more cost effective than the US
Large highly skilledtalent pool
• Largest number of graduates in the world - 78 million in 2016. Of which, 2.6 million were science, technology, engineering and mathematics (STEM) graduates
• World’s third largest pool of scientists, technicians
• Home to the world’s second largest number of English speakers
• An estimated US$ 1.6 bn is spent annually on training workforce in the sector
{Focus oninnovation
• 3rd largest tech start-up hub in the world, by number of start-ups and number of start-up incubators/accelerators
India: A Global Leader
Source: Invest India, NASSCOM, news articles, CII compilation
{Rapidly growingdomestic market
• Fastest growing enterprise tech market in APAC
• Initiatives such as Digital India resulting in focus on e-governance and thus related products / services driving growth
{Enablinginfrastructure in-place
• World’s second largest internet user base
• World’s second largest telecommunication market powered by state-of-the-art technology
INVESTMENT OPPORTUNITIES
{Fintech
• Financial inclusion remains a challenge in India, thus offering an opportunity for Fintech companies
• Potential for innovative technology solutions in areas such as microfinance, digital payments, credit scoring, remittances and servicing MSMEs
• Indian Fintech market forecast to touch USD 2.4 billion by 2020 (NASSCOM)
{Specialisedverticals
• Opportunity to cater to specialised high-growth verticals such as Healthcare
{Newtechnologies
• Data analytics, cyber security and mobile app development will be the key growth drivers for the IT products sector in the days ahead
• Solutions using new technologies such as Artifical Intelligence, Blockchain, etc
{Customisedsolutions
• Innovative technology solutions will be a key driver of the planned 100 smart cities
Multiple Opportunities across the Sector
Source: NASSCOM, news articles, CII compilation
BUSINESS ®ULATORY ENVIRONMENTIN INDIA
05
REFORMS FOCUS
Fiscalprudence andaccountability
Integratedtax
regime
Enabling Ecosystem
Servicespush
Job creation and inclusive
growth
REGULATORY ENVIRONMENT – INDIA
Foreign Investment Framework
• Governed by Foreign Exchange Management Act, 1999
• Progressive liberalization in the policies
• Automatic route (No prior approval requirement) such as railway and road infrastructure
• Approval route (Prior government approval required before setup) such as multi brand retail trading
Foreign Direct Investment (FDI) in India
Evolution of foreign investment regulations
FDI INVESTMENT ROUTE
Under Automatic Route Prior Approval Route
No requirement of any prior regulatory approval
Filing an intimation with RBI in prescribed format within 30
days of investment
Filing particulars of issue of shares within 30 days of issue
of shares to foreign investors
Filing an intimation with RBI in prescribed format within 30
days of investment
Filing particulars of issue of shares within 30 days of issue
of shares to foreign investors
Required approval from Govt. of India – Considered by respective Administrative Ministry/Department.
BUSINESS PRESENCE IN INDIA – FORM OF ENTITIES
Establishes local presence
Operates as a foreign company
Foreign Company
Liaison Office Project Office Branch Office Joint Ventures Limited Liability Partnership
Wholly Owned Subsidiary
Key considerations for choosing
investment vehicles
• Commercial considerations
• Regulatory framework (prior approval requirements for Chinese companies)
• Tax considerations
• Cost of operations{
This Report has been prepared by CII.
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