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 &REGULATORY 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.