Information and communications technology to India

(Last updated: 16 Jan 2008)

Trends and opportunities

The market

The development of India’s information technology industry is well-documented. Currently, India has an estimated 40 million Internet users, making it the country with the fifth-largest number of Internet users. Yet, that number only represents 3.6 per cent of the total population. The USA, with over 100 million Internet users, has a penetration rate of 68.7 per cent and Australia, with approximately 14 million users, has a penetration rate of 68.2 per cent. 

The government recognises the significant economic opportunity that the information technology (IT) explosion represents to India and is committed to the policies, infrastructure development and education investment to maintain the growth.

Enrolment in Indian technology schools is expecting to reach 600,000 by 2008. The government has set a target of 20 million broadband users by 2010. The Indian federal and state governments are committed to developing and broadening e-governance. Fourteen state governments have IT-specific priority policies and many have implementing IT-related projects.

In 1998 revenues from IT-enabled services were estimated at A$360 million. In 2008 they are projected to be A$34 billion. Call centres, in particular, are expected to be a growth area.

The domestic software sector is dominated by ready-to-use products and packages, which account for 40 per cent of the market followed by projects, around 30 per cent. Domestic companies account for less than 20 per cent of the total market, indicating a high demand for imported products.

Opportunities

Some of the leading opportunities in India’s IT sector for Australian companies exist in:

• Software products for vertical industries such as health, transportation, insurance, finance, chemical, and engineering
• IT-enabled services (particularly call centre project consultancy), systems and software such as automatic call distribution, interactive voice recognition, computer telephony integration, helpdesk and employee training
• Banking products such as risk management, centralised banking, nostro reconciliation, Internet banking
• Network and Internet security consultancy and products
• SMART card and EFTPOS/point of sale equipment
• Products and services for radio/television broadcasting and the film industry such as digital studio production, equipment, software, transmission system
• Equipment and software for broadband and cable television industry
• E-governance projects
• Joint research and development projects for emerging technologies and solutions around established technologies

Competitive environment

India faces competition from the information technology sectors of countries such as Ireland, Canada, China, Mexico and Russia. Competition for talent and business in India is on the rise. However, it is likely that India will maintain its competitive advantage with the combination of English-language fluency; low-labour costs; and stable political institutions, along with:

• Maintaining the human resource talent pool with education investment
• Staying abreast of the technology curve through infrastructure development

Competition will increase and India will need to meet the challenges of changing technology. India does not have to solely rely on export market; rising incomes and living standards will continue to release the domestic market to consume information technology products and services.

The big US players are committed to the Indian information technology sector. Microsoft is investing US$1.7 billion over four years, Intel; US$1 billion over five years, and Cisco; US$1.1 billion over three years.

Tariffs, regulations and customs

The following outlines how import duties apply in the Indian information technology sector:

• Software products attract no import duty
• Hardware products, parts, and peripherals attract import duty ranging from five per cent to 40 per cent
• Import duty in India involves direct import duty, countervailing duty (equivalent to local production duties) and special import duty

Industry standards

The Ministry of Communication and Information Technology (MCIT) is responsible for India’s information technology sector. The Ministry’s Department of Information Technology is responsible for the Standardisation, Testing and Quality Certification (STQC) Directorate which supervises and promotes product and industry development.

Most of the large participants in the Indian IT industry – especially those in the software sector – have quality certifications such as ISO9000 and Software Engineering Industry (SEI) level five. Australian companies are required to operate within ISO requirements.

Two-thirds of Software Engineering Institute Capability Maturity Model (SEI CMM) level five-certified software companies in the world are Indian. IT consumers in India demand proven products and often ask for customer references.

Marketing your products and services

Market entry

A number of high-level Australian IT-related missions have made representations in India. Likewise, Indian IT-related missions have visited Australia. Australian companies are advised to build on this awareness and profile, and importantly, maintain personal and business relationships, visiting the market regularly to keep abreast of the rapid changes.

Setting up a local office is a useful way of keeping contact with the customer base and showing long-term commitment to the market.

Conscious of India’s success in exporting software development, Australian business should consider targeting niche areas in the software and hardware industries – marketing products and services complementary to India’s strengths in IT. Australia has a good image in e-governance, the call centre industry and the application of software in industry verticals. Australian companies can leverage this reputation and develop a market profile through media interviews, submitting articles for publication and giving presentations at conferences and seminars.

India’s National Association of Software and Service Companies (NASSCOM) is the premier trade body and the chamber of commerce of the IT software and services industry in India. NASSCOM hold a series of sector-specific shows throughout the year, which are well attended by Indian and international companies.

Australian companies that have been successful in international markets, especially the USA, should use this as a marketing tool in India.

India has a well-established network of IT product channels. Box movers have a network of retailers and value-added resellers across the country. These companies provide a direct way to introduce the product quickly.

Indian customers place importance on the production-quality of company literature. Australian companies should produce both colour printed and Portable Document Format (PDF) literature. Local players seek specific technical and application details. Providing prospective customers and partners with a reference list of major clients and projects will be helpful.

Distribution channels

India has a well-established network of specialist consumer IT product and service channels that service both retailers and valued-added resellers across the country. Australian companies can tap into these channels, either directly or by appointing an agent or distributor. It’s advisable to appoint regional or city-specific distributors if a preferred distributor doesn’t have sales infrastructure across a number of the major city markets.

Australian exporters focused on the corporate and government markets should investigate appointing channel partners or, especially in the case of software companies, implementation partners.

Australian software companies are targeting a specific vertical, eg. mining, can use distributors involved in the vertical but not specifically marketing IT products, as a strategy to reach the target market. 

For those companies seeking consultancy contracts, dealing directly with private sector companies is the most effective strategy.

Transport

The Indian railway network consists of 62,809 route-kilometres of rail track spread over entire length and breadth of the country. However, it is more efficient to travel by air as trains are slow by international standards.

Air-India is the country’s international carrier. Air-India, along with a handful of other airlines, provides extensive domestic passenger and cargo air services.

Among the 11 major ports, Mumbai is the largest port handling almost one-fourth of the entire trade transported through Indian ports.

Infrastructure costs including railway freight and port handling charges in India are not considered competitive compared to other major countries. However, this aspect is recognised by the government and all efforts are being made to improve the infrastructure with the help of private sector involvement.

Links and industry contacts

Information technology-related resources

IDC India – www.idcindia.com
Manufacturers’ Association for Information Technology – www.mait.com
Ministry of Information Technology – www.mit.gov.in
National Association of Software and Service Companies (NASSCOM) – www.nasscom.org
Patni Computer Systems – www.patni.com
Software Technology Parks of India – www.stpmum.soft.net
Sonata Software – www.sonata-software.com
Tata Infotech – www.tatainfotech.com
The IndUS Entrepreneurs, Mumbai – www.tiemumbai.org 

Government, business and trade resources for India

Business Information Services Network – www.bisnetIndia.com 
Central Board of Excise and Customs – www.cbec.gov.in
Chambers and Associations – www.tradenic.nic.in/vstradenic/prm3.htm
Government of India Site – www.nic.in
Indiaindustry.com – www.indiaindustry.com
Indiamarkets – www.indiamarkets.com
Ministry of Finance – www.finmin.nic.in
National Centre for Trade Information – www.ncti-india.com
National Informatics Centre (Ministry of Commerce) – www.nic.in/eximpol
Securities Exchange Board of India – www.sebi.gov.in
Trade and Industry Organisation – www.tradenic.nic.in/vstradenic/toii3.htm 

Federation of Indian Chambers of Commerce and Industry – www.ficci.com
Federation House, Tansen Marg
New Delhi 110 001
Tel: (91 11) 373 8760 – 70
Fax: (91 11) 372 1504

Confederation of Indian Industry – www.ciionline.org
23, 26 Institutional Area
Lodi Road, New Delhi 110 003
Tel: (91 11) 462 9994
Fax: (91 11) 463 3168 / 462 6149

Service providers:

Financial

Bombay Stock Exchange – www.bseIndia.com
Export Import Bank of India – www.eximbankindia.com
Industrial Credit and Investment Bank of India – www.icici.com
Industrial Development Bank of India – www.idbi.com
National Stock Exchange – www.nse-India.com
Reserve Bank of India – www.rbi.org.in
State Bank of India – www.sbi.co.in

Legal

Lexsite – www.lexsite.com

Logistics

Air-India – www.airindiacom
Qantas – www.qantas.com.au/freight/dyn/menu

Media

123 India – www.123india.com
Assocham Publications – www.assocham.org
India Infoline.com – www.indiainfoline.com
Indian Express – www.expressindia.com
India Today – www.india-today.com
Khoj – www.khoj.com
Outlook Magazine – www.outlookindia.com
Times of India – www.timesofindia.indiatimes.com

Australian resources

Department of Foreign Affairs and Trade (India fact sheet) – www.dfat.gov.au/geo/fs/inia.pdf 

Indo-Australian Chamber of Commerce
Arjay Apex Centre, 3rd Floor
24, College Road
Ningambakkam
Chennai 600 006
Tel: (91 44) 821 3231
Fax: (91 44) 822 5603

Australian High Commission
1/50G Shantipath
Chanakyapuri
New Delhi 110 021
Tel: (91 11) 2688 8223
Fax: (91 11) 2687 4126 (Consular and Administration)
Fax: (91 11) 2688 5199 (Austrade)
Opening hours: 
8.30am to 5.00pm, Monday to Friday

Australian Consulate General
Maker Tower E, 16th Floor
Cuffe Parade, Colaba
Mumbai 400 005
Tel: (91 22) 2218 1071
Fax: (91 22) 2218 8228 (Austrade/Consular)
Fax: (91 22) 216 2649 (DIMIA)

High Commissioner of India – Australia – www.hcindia-au.org
3-5 Moonah Place
Yarralumla ACT 2600
Tel: (61 2) 6273 3999, 6273 3774 or 6273 3875
Fax: (61 2) 6273 1308

Consulate-General of India, Sydney – www.indianconsulatesydney.org
Level 27, 25 Bligh Street
Sydney NSW 2000
Tel: (61 2) 9223 9500
Fax: (61 2) 9223 9246