India’s Growth Story- How IT Exports helped the Indian Economy Post 1991?

The growth of the IT industry in India has put it on the world map as one of the unprecedented economies in the world. How did this surge happen?

Information Technology is one of the most prominent parts of the Indian industry in the 21st century. Our country is recognized as a knowledge economy thanks to its impressive IT industry. However, this exponential growth in the software export industry didn’t happen overnight.

In fact, by the end of 1990, Indian foreign exchange reserves could barely survive three weeks’ worth of imports. The government came very close to defaulting due to immense financial obligations, the collapse of the Soviet Bloc, and other internal debts.

So, how did India change with a quadruple rise in its GDP and a surge of exports from $18 billion to $178 billion? And what’s the role of IT exports in this huge growth?

The Early Foundation

India saw its first wave of IT entrepreneurship in the 1980s when Wipro Information Technologies, Infosys, NIIT, and Mastek started to establish themselves in the country. During this time, the software services export market opened up some lucrative opportunities, initiating the liberalization of the computer industry.

The Rangarajan Committee led to banking computerization which was a huge deal at that time. Companies like Tata Consultancy Services and Infosys started developing banking products — a segment that made India one of the leaders in the world of banking products.

However, our country was still a decade behind bringing the IT industry to the front. In 1986, India brought a lot of liberalization policies for the IT industry that de-licensed hardware import and enhanced duty-free import as well. This policy gave a massive boost to the industry which later contributed to India now being an IT hub for software companies, globally.

The Surge of The IT Industry in India

The government of India had strict restrictions regarding private businesses which didn’t give the IT industry a chance to really grow. Wide area networks and internet lines were in control of the central government. As a consequence, despite having the potential the IT sector was held back due to these restraints.

However, the economic liberalization of 1991 changed everything for India. The first significant reform in the IT sector by the government was the creation of a corporation called Software Technology Parks of India (STPI). This corporation was responsible for providing satellite links to major IT developers in the country, enabling them to send the work directly abroad. This step reduced the costs of production in the IT companies. India could approach US clients to trust and outsource their work.

As mentioned before, India was going through a huge economic crisis in the 90s. Dr. Manmohan Singh, then Finance Minister introduced many economic policies to solve the country’s debt problem. Out of many reforms, internet integration was a massive one that became a tool for foreign investments in the country.

As a result, many global organizations started to invest in the IT industry and software export finally gained momentum. The inception of Windows was a contributing factor as well, making the computer experience simpler and less time-consuming for people.

Due to this rise in demand, the development of JavaScript, C, C#, and other high-level programming languages made India a perfect hub for IT brains to explore and rise in the global market.

In 1991, the US corporations gave the task of rectifying the Y2K bug to the Indian IT industry. This was a big modification and a huge working opportunity. The Y2K bug rectification alone assisted in a massive push for the national GDP.

So it pays to invest some time to learn about some of my blogs in :

Technology : AWS Vs. Azure — Who wins the battle of the clouds?

Social Media : A Guide to Improve Your social media ROI In 2022 And Beyond

The Present Scenario & Future

Since 1991, the IT industry in India has grown rapidly accounting for over 75% of global digital talent. The four major IT companies — Wipro, TCS, Infosys, and HCL Tech are responsible for millions of employment opportunities, generating tons of jobs each year. Along with that, newer startups and digital IT companies are boosting the demand in the digital economy.

In 2019–20, the majority of global brands are sourcing IT-ITES from the Indian IT sector, accounting for over 55% of the global sourcing market, i.e., around $250 billion.

As the IT industry begins to expand and grow, India’s share of GDP continuously gets boosted. From a small 0.4% of share in 1991–1992 to 7.4% in 2022, India’s IT sector has come a long way.

The industry has cemented its position so strongly in the market that even when COVID-19 hit in 2020, the Indian IT hub was showing signs of growth. The whole world was shutting down and unable to grapple with huge loss. However, IT companies made reformations in the workforce and continued to emerge as strong contributors to the Indian economy.

Contribution of Indian IT-BPM industry in GDP of India FY 2009–2022 Source : statista.com

In the upcoming years, newer technologies like telemedicine and remote working force along with the roll-out of 5G communication, rapid adoption of AI technology, Big Data Analytics, and cloud computing would only pave the rise of the industry in India.

By 2025, revenue is expected to accelerate at a much faster rate, reaching approximately $350 billion. The GDP share would also increase to 10% by 2025.

Concluding Thoughts

There is no doubt that the IT industry in India has immense working opportunities, augmenting the rise of the Indian economy steadily in the global market. Along with that, India has a talent pool of skilled human resources. Due to the rise of the IT sector, the Indian middle class has increased their standard of living, as more than 2 crore people have a source of income from this industry today.

With instrumental transformation going on in the country, India is gaining land in new disruptive technologies as well. The IT industry of India would play an active role in the upcoming fourth industrial revolution globally.