India Information Technology Report

Exclusively for the use of LRC Hyderabad at Indian School of Business.
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Q3 2022
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India
Inf
Informa
ormation
tion T
Technology
echnology R
Report
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Includes 5-year forecasts to 2026
Exclusively for the use of LRC Hyderabad at Indian School of Business. Downloaded: 20-Jul-2022
India Information Technology Report | Q3 2022
Contents
Key View............................................................................................................................................................................................ 4
SWOT .................................................................................................................................................................................................. 6
Information Technology SWOT............................................................................................................................................................................................... 6
Industry Forecast........................................................................................................................................................................... 7
Market Overview..........................................................................................................................................................................13
Industry Trends And Developments .....................................................................................................................................23
Competitive Landscape.............................................................................................................................................................28
India Demographic Outlook .....................................................................................................................................................36
Information Technology Methodology.................................................................................................................................39
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Key View
Key View: The outlook for the Indian IT market is robust, with impressive double-digit gains envisaged annually over the medium
term to 2026. India's IT market posted a robust rebound in H221 after the Covid-related issues subsided and sales growth in Q122
was healthy. We envisage stable momentum over H222 and over the medium term to 2026. India is emerging as a
major beneficiary of foreign investment targeting software as a service, as well as cloud and business process management, over
the past 24 months. The government is a major customer of IT solutions and has been offering lucrative investments to encourage
foreign IT vendors to expand their manufacturing and services footing in the country. IT sector friendly policies to bolster the
domestic industry will result in lowering costs for hardware, while stimulating uptake among price-conscious consumers and
enterprises.
Robust Growth Envisaged

India - IT Forecast Breakdown (2019-2026)
f = Fitch Solutions forecast. Source: Intracen, local sources, Fitch Solutions
Latest Updates And Industry Developments
• We have revised our forecasts for spending in India's IT market in 2022, due to stronger-than-expected growth over 2021. In
2022, India's IT market is expected to grow by 11.4% y-o-y in local currency terms to reach a value of INR3.9trn (USD51.8bn).
• Latest trade data notes that IT trade balance widened by 57% to USD31.0bn, up from USD19.6bn in 2020 on the back of robust
demand for notebooks and components. The rapid growth in domestic PC assembly continues to drive market momentum.
• Germany-based software giant SAP stated in June 2022 that it would double its investments in India over 2022/2023 including
hiring 3,600 new employees. Furthermore, SAP is building a 169,968sq m campus with over 15,000 seating capacity which is set
to be ready by 2025.
• A reinvigorated focus on e-government initiatives, as well as a focus on domestic manufacturing and assembly programmes,
such as Production-Linked Incentives (PLI), could also lower prices and motivate higher sales volumes.
• In 2021, it was reported by official sources that around 20 firms had filed for PLI incentives, with the government targeting over
USD15bn worth of IT hardware manufactured under the scheme by 2025/2026. Furthermore, in the 2021/2022 and 2022/
2023 budgets, multibillion dollar provisions were established for domestic ICT manufacturing.
• As India's economy moves up the value chain, the use of IT solutions will gradually become a necessity. Rising incomes and a
transformation of the household income profile will be positive in supporting growth in the IT segment; this will result in a
deepening of the retail PC market, and provide important support to enterprise confidence and investment. We highlight strong
opportunities across many industry verticals, including the burgeoning fintech segment (compliance, software solutions), and
the agriculture sector (namely data-driven solutions to enhance crop yields).
• The business process outsourcing (BPO) segment remains a major source of revenue for Indian companies, and the country is
the pre-eminent BPO hub in the world, given the large presence of a semi-skilled English-speaking workforce.
• Data centre investments by foreign cloud providers into India has also maintained its steam. Oracle opened its first data center
in Mumbai in 2019 and the second in Hyderabad in June 2020. The company stated that its data centers have over 15,000
enterprise clients, with a focus on Platform-as-a-Service and Infrastructure-as-a-Service workloads. Meanwhile, Google
Cloud launched its second Cloud Region in Hyderabad in July 2021, and Amazon is set to open its second Amazon Web
Services in India in Q222.
• In March 2022, Microsoft stated that it would invest INR150bn over the next 15 years to develop the largest data centre in the
country in Hyderabad. The investment will also entail bolstering the local IT market including supporting partners and other
collaborators.
SWOT
Information Technology SWOT
SWOT Analysis
Strengths • Substantial young addressable market with rising disposable incomes will support demand IT spending
toward the medium-to-long term.
• Rising demand from businesses across all IT segments, with a pronounced acceleration in demand for cloud
services, providing considerable monetisation opportunities.
• The public sector remains one of the IT sector's biggest consumers, given the reinvigorated push for e-
government services and high spending on cloud computing services.
• The market's position as the foremost business process outsourcing centre in the world is supported by the
presence of a large and semi-skilled workforce with high levels of English language proficiency.
Weaknesses • The low levels of business formalisation mean that the penetration of even basic computing services is low,
making it difficult for software and services vendors to penetrate the market.
• Poor intellectual copyright protections, coupled with high piracy rates, make it difficult for software vendors
to monetise their products.
• Despite efforts to modernise government, many processes remain bureaucratic and inefficient.
• Low levels of access infrastructure, including energy and telecommunications, in rural areas makes revenue
deepening efforts by vendors challenging.
• Regulatory environment often fails to catch up to the advancements in the IT sector.
Opportunities • In the 2021 and 2022 budgets, the government earmarked multibillion dollar provisions for IT development.
• The growing tech start-up ecosystem, which features many companies providing a diverse range of
innovative services, is a key opportunity for IT vendors.
• The government continues to double down on local IT manufacturing incentives, with its overarching 'Make
In India' initiative and its production-linked incentives programmes positive in spurring electronics
production and assembly, potentially lowering costs.
• Government push for data localisation requirements will provide a stimulus to domestic data storage
providers.
• Government and enterprises showing an appetite for cloud computing services, including Infrastructure-as-
a-Service and Software-as-a-Service, which has attracted major inward investment from global leading
vendors, creating a virtuous circle.
• Government push for the development of the Internet of Things industry will create opportunities for
networking, software and services vendors in India over the medium term.
Threats • The demand for notebooks and desktops continues to be cannibalised by the sale of low-cost smart devices,
namely smartphones. Intense competition between mobile operators has further accelerated this trend.
• Slow build out pace of communications infrastructure could hamper the sale of IT services.
• Rising competition from Mainland China and other Asian markets such as Vietnam and the Philippines for
global business process outsourcing market share could create competition for India.
• Revised labelling guidelines from the Bureau of Indian Standards could hurt white box manufacturers.
Industry Forecast
Key View: We forecast robust growth in the Indian IT market, driven by government incentives, public sector modernisation,
increased enterprise sentiment and above-trend investments into the IT sector. IT penetration in the SME and large scale
enterprises segments will present ongoing opportunities for hardware, software and services out to 2026 and beyond. Low levels of
adoption of basic computing applications among both consumers and businesses in rural areas is also a prime market opportunity.
At present, we note that global inflationary pressures, geopolitical shocks and a potential economic slowdown pose downside risks
to market momentum over the coming year.
2022 Outlook
We have revised our forecasts for spending in India's IT market in 2022, due to stronger-than-expected growth over 2021. In 2022,
India's IT market is expected to grow by 11.4% y-o-y in local currency terms to reach a value of INR3.9trn (USD51.8bn). A
reinvigorated focus on e-government initiatives, as well as a focus on domestic manufacturing and assembly programmes, such as
Production-Linked Incentives (PLI), could also lower prices and motivate higher sales volumes.
• The Indian IT market is estimated to have grown by just 0.1% in 2020, due to the Covid-19 slowdown, and by 20.5% in 2021. We
have positively revised the 2021 estimate to account for the robust import data.
• We forecast the Indian economy to post headline real GDP growth of 7.5% in 2022, while private final consumption will track
upwards by 7.6%. Headline growth in 2021 was strong (8.6% y-o-y) as the economy reeled from the Covid-19 pandemic shocks
of 2020.
• In 2022, year-on-year hardware spending growth will be positive (10.5%), but stronger growth will be seen in the services (11.2%)
and software (12.3%) segments. This is a result of potentially weaker PC demand given that consumers frontloaded their
purchases of such equipment to support telecommuting.
• Investments into new data centre projects will also support the outlook for server demand; among others, hyperscale cloud
vendors including Amazon have announced plans to scale up their presence in India.
• In March 2022, Microsoft stated that it would invest INR150bn over the next 15 years to develop the largest data centre in the
country in Hyderabad. The investment will also entail bolstering the local IT market including supporting partners and other
collaborators.
• Over the past 24 months, Google
Google, Microsoft and Oracle have all bolstered their Indian cloud presence through heavy capital
expenditure levels in the market.
• Spending on software and services will appreciate markedly, with spending on cloud computing expected to be a bright spot in
the Indian IT market. Following slight weakness in 2020 as businesses put off their digitisation plans, we expect demand to pick
up in the coming year as companies demand greater operational resilience and scalability.
• However, this would translate to a weaker outlook for traditional services as on-premise systems could be squeezed out by
automation and cannibalised by the shift to the cloud. We also expect a pick up in global demand for business process
outsourcing (BPO) services, of which India is one of the leading global destinations for.
IT Market Growth
2020-2026
f = forecast. Source: Fitch Solutions
Market Drivers
The overall penetration of IT services in India remains low, providing substantial growth opportunities. India is a large emerging
market with gradually rising incomes and a growing population, which are ripe, low-hanging fruit for vendors. Adoption of IT
solutions is also low across all industries, even in government services and entities.
• Our core view is for sustained periods of high growth rates, and India will outperform many markets in the Asia-Pacific region; this
will be supported by robust investments from foreign multinationals and tech majors. Sector performance strengthened over
H221-H122 as the economy emerged strongly from recession.
• For now, we forecast IT market growth to average 11.4% over 2022-2026 with total spending set to reach INR6.1trn (USD71.2bn)
by 2026.
• Growth in private consumption, which will be driven by rising disposable incomes, and expected to make up 60.4% of GDP by
2026, up from a forecast 58.0% of GDP in 2020. Private consumption will remain a key driver of IT spending in India over the next
five years. With the active population rising at a faster rate than the dependent population, annual income growth and the overall
savings rate will also rise, supporting IT market consumption. However, enterprise sentiment could be pushed down due
tightening fiscal and monetary conditions in the long term. This could also lead to subdued spending from consumers, who
remain highly sensitive to price.
• The anticipated weakness in the Indian rupee over our forecast period will make imported IT goods less affordable. This, to an
extent, will be offset by India's increasing share of domestic tech hardware production. While production remains skewed
towards lower-value consumer products, such as smartphones, rather than higher-value servers or computers, we are optimistic
of the growth of the domestic assembly industry.
• The PLI scheme for handset and component manufacturers, which was first launched in April 2020, has already attracted
smartphone vendors including Samsung, and original design manufacturers including Foxconn, Wistron, and Pegatron. In
November 2020, the Cabinet approved plans to extend the PLI scheme for the manufacture of laptops. By Q122, manufacturers
such as Lenovo had already outlined plans to increase production of laptops and tablets in India.
• While local producers, such as Lava and Micromax, have been quick to exploit these more attractive conditions resulting from
the PLI and other top-level government initiatives such as 'Make In India', global players have made faster progress, using their
scale to invest in new facilities and striking supply deals both locally and regionally. The National Electronics Policy has also been
positive in growing the local electronics manufacturing market. Further relaxation of local sourcing rules, which have allowed
single-brand retail companies to limit their sourcing of Indian products to just 10%, provided that 20% of their products are
exported to other countries, will also be positive for the market.
• Several IT retailers, including Apple, have welcomed the move as they seek to expand their retail operations in the country; this
could present upside risks to our IT spending forecasts. In September 2020, Apple launched its direct online retail presence in
the country.
• While investments from IT vendors remain centred around larger, core cities, there continues to be a focus on smaller cities in
India, where the PC penetration is lower than the larger, more formalised cities. This dynamic is reflected in announcements of
major IT vendors to expand/upgrade their retail and distribution networks and gradually shift the main focus away from urban
areas. However, this highlights the fragmented nature of the retail market and the significant urban/rural divide in India.
• Vendors will also be able to gain share from burgeoning IT start-ups in the country. There are several well-established Indian-
based unicorns, such as Paytm, OYO and Ola, which have all been heavily investing into new disruptive technologies, such as
artificial intelligence (AI) and new innovations at the consumer level. The recent ban on Chinese apps carried out by the Indian
government in June 2020 will also support the rise of locally based tech companies; apps, such as Roposo - a substitute for the
banned ByteDance app TikTok, has reported a strong uptake following the ban on Chinese services. The rise in Indian start-ups
is also attributed to unique solutions being offered by these companies in global whitespace opportunities such as the Internet
of Things (IoT), augmented reality, smart hardware, business intelligence and many more.
• Rising investments from foreign players into local data storage capacity is also largely a result of complying with the Personal
Data Protection Bill, which, if passed, will force foreign companies to store data collected on Indian citizens locally. The Reserve
Bank of India has already enacted legislation to force digital payments players to store transaction information in Indian data
storage facilities. The growing data centre market will support demand for servers and IT support services.
• Smart cities and IoT solutions will benefit the IT sector going forward, with local telecoms operators already looking to accelerate
the development of these projects. However, it remains to be seen whether lofty targets set by the government could be
translated into action, given the financial pressures faced by the government. While 5G trials are reportedly ongoing, Indian
telecoms operators are unlikely to commercialise 5G services soon given the raft of pressures they are facing, largely resulting
from disagreements with the regulator over their adjusted gross revenue (AGR)-related licence dues. Nonetheless, 5G, when
launched, could help support the development of new computing paradigms, such as edge computing and cloud solutions,
across different industries, including healthcare and banking.
• The government continues to promote uptake of new technologies, such as IoT and AI, through policies, such as the National
Digital Communications Policy, among others, which we expect to contribute positively to IT spending growth.
• In the hardware segment, we see sustained demand potential coming from the small business segment in India - a group which
has very much lagged in the adoption of even the most basic computing set-ups. India's small and medium-sized
enterprise (SME) market is a multi-billion dollar digital enabling opportunity for IT vendors. India has an estimated 42.5mn SMEs,
with only a small amount of them digitally enabled. The growth will be primarily driven by affordable enterprise grade solutions as
cloud solutions are more widely available and the mobile app ecosystem. Continued migration toward smartphones could,
however, put a squeeze on low-end PC sales.
Purchasing Power And Demographic Trends

Household Income Breakdown (2022-2026)
f = Fitch Solutions forecast. Source: Local sources, Fitch Solutions
• We believe the transformation in India's household income profile over 2022-2026 will result in a deepening of the retail PC
market and provide important support to enterprise confidence and investment. India is, however, coming from a low base,
trailing Mainland China by a wide margin in terms of household incomes, evident in our data (see chart above) that show India to
be a very low-income market. This is also reflected in household PC penetration at around one quarter the level of China.
• The overall medium-term outlook is positive in India, but there are also several drags on market development, which, if
addressed, could see the growth rate trend higher. Regional imbalances and a flawed legal regime for patent protection are a
drag on growth, while measures to encourage the domestic hardware sector have so far had mixed results (although Modi's
'Make In India' initiative and the newly announced PLI has catalysed the handset and tablet industry). Meanwhile, the important
BPO market faces a strong challenge from other markets, including China and the Philippines. The rise of AI across the world
could also wipe out lower-value BPO work toward the long term.
Verticals
• We maintain our forecast that the Indian enterprise IT market will be a regional outperformer over the medium term, and by the
end of 2026, our forecasts envisage the market to be over double the size of the size of the market seen in 2011. As a result of
the upbeat and bullish sentiment, many Indian private and public sector organisations are investing in upgrading their IT
infrastructure or adopting solutions for the first time. The enterprise market offers vendors a wide variety of opportunities, but in
the short term it will be traditional overweight IT spending verticals including financial services, telecoms and the public sector
that will account for the majority of demand.
• A key vertical over the medium term will be the Indian insurance and financial services sector, which is expected to be a major
source of growth for vendors, with investment in internal IT infrastructure, including hardware and software and manpower and
external IT services and telecommunications, all forecast to be growth areas. This reflects global patterns of enterprise IT
spending, with the vertical overweight in IT markets globally due to the level of demand for complex solutions. The rapid growth
of the financial technology (fintech) sector, and the potential for IT solutions to tackle India's massive underbanked population
could also be a prime opportunity for IT vendors to provide solutions such as anti-money laundering (AML) and know-your-
customer (KYC) systems.
• The public sector will also offer growth opportunities, for instance via the government's new e-government initiatives, including
Digital India, which could be major drivers of public sector spending in the medium term. This would add to the wave of
computer procurements by local governments, for instance, major education procurements from state governments.
• The emerging niche technology solutions are primarily targeted towards ad-tech, edu-tech, health-tech, agri-tech and several
others. This has attracted major investment directly in start-ups and via start-up accelerators from global players including SAP
and Microsoft.
ENTERPRISE TRENDS - GVA BY VERTICAL (INDIA 2020-2026)

Indicator 2020e 2021e 2022f 2023f 2024f 2025f 2026f
Agriculture nominal GVA, % total GVA 17.21 16.82 16.40 16.11 15.91 15.72 15.54
Mining nominal GVA, % total GVA 1.92 2.24 2.30 2.21 2.11 2.02 1.95
Manufacturing nominal GVA, % total GVA 16.56 16.79 16.84 16.87 16.89 16.91 16.95
Construction nominal GVA, % total GVA 7.24 7.34 7.30 7.30 7.31 7.31 7.28
Finance nominal GVA, % total GVA 4.64 4.68 4.65 4.53 4.42 4.33 4.25
Real estate nominal GVA, % total GVA 17.26 17.76 18.24 18.59 18.87 19.13 19.37
Other services nominal GVA, % total GVA 7.56 7.53 7.51 7.45 7.37 7.31 7.25
Utilities nominal GVA, % total GVA 3.25 3.22 3.27 3.35 3.43 3.49 3.55
Trade, accommodation & food service nominal GVA, % total GVA 14.59 14.07 13.99 14.05 14.08 14.11 14.13
Transport & communications nominal GVA, % total GVA 8.77 8.61 8.64 8.78 8.92 9.04 9.15
Public administration, education and human health nominal GVA, % total GVA 1.01 0.93 0.86 0.77 0.69 0.63 0.59
e/f = Fitch Solutions estimate/forecast. Source: Central Statistics Organisation, Fitch Solutions
• Reinvigorated investments by cloud computing majors into India will also benefit the segment. The government is also a leading
actor in driving awareness and adoption of cloud services, and new cloud computing offerings are expected to fuel further
demand from local end-users to use this technology.
• The cloud opportunity, however, will emerge only gradually given the relatively less formalised state of many segments of the
economy. Many Indian enterprises have the opportunity to leapfrog on-premise deployments, but with the adoption of basic PCs
and computing devices at an extremely low level, the broader digitalisation potential will remain limited. The development of
digital infrastructure has also lagged, with broadband and 4G penetration trailing that of other large markets, like China, by a
significant margin. On the upside, the government is a proactive user and customer of cloud services. The Ministry of Electronics
and Information Technology introduced guidelines in October 2019 to assist government departments in their cloud services
procurement process.
• The IT-enabled service sector remains critical to overall enterprise spending growth. According to government figures, India's
BPO industry continues to grow at a double-digit rate per annum, generating continued opportunities for vendors of IT products
and services. The fastest growing software and services areas are therefore expected to be call centres and BPO operations, with
80% of domestic industry revenue coming from exports. However, a NASSCOM report identified a strong challenge to India's
BPO dominance from other countries, including China.
IT INDUSTRY - HISTORICAL DATA AND FORECASTS (INDIA 2020-2026)

Indicator 2020 2021 2022f 2023f 2024f 2025f 2026f
IT market value, INRmn 2,937,864.1 3,539,831.9 3,942,175.1 4,414,906.3 4,934,850.2 5,483,267.8 6,072,165.8
IT market value, % of GDP 1.5 1.5 1.5 1.5 1.6 1.6 1.6
Computer hardware sales, INRmn 1,486,138.5 1,887,932.0 2,099,878.8 2,354,445.3 2,653,609.1 2,976,437.0 3,335,210.6
Personal computer sales, INRmn 1,127,344.6 1,431,727.7 1,559,151.4 1,702,593.4 1,855,826.8 2,017,283.7 2,188,752.8
Software sales, INRmn 429,321.0 489,425.9 549,625.3 610,084.1 669,872.4 729,491.0 790,768.2
Services sales, INRmn 1,022,404.5 1,162,474.0 1,292,671.0 1,450,376.9 1,611,368.7 1,777,339.7 1,946,187.0
Market Overview
Recent Developments
• Domestic IT spending growth in India slowed considerably in 2020 after robust growth over the 2015-2019 period. The
pandemic has had a disproportionate impact on lower-income households, which form a disproportionately large portion of all
households in India. Lockdowns enacted in the second quarter of 2020 also heavily impacted market spending as e-commerce
channels in many parts of the country were not formally developed, and many consumers were unable to access physical retail
stores to purchase equipment. However, we believe that spending recovered over H221 and was buoyant in H121.
• The cloud and services segment is estimated to have grown in 2020 as the adoption of new digital paradigms and remote
collaboration tools by businesses props up the IT market. The public sector, together with government digitisation initiatives
have also appeared to have stayed its course in 2020, and this has propped up demand for cloud, managed services and
software.
• This segment has also been driven by increased investments from hyperscale cloud vendors into creating more availability
zones in the country. The small- and medium-sized enterprise (SME) opportunity stands out for the services market, with the
favourable cost profile and increasing supply of cloud and IT services in India deepening the market for enterprise applications
and other services to this previously underpenetrated area.
• Latest statistics from the Department for Promotion of Industry and Internal Trade suggest that India continued to witness a
surge in foreign direct investment over FY2020/21, during the pandemic downtrend. This was owing to major global companies
such as Foxconn, Lenovo and Google outlining ambitious investments plans in India. The BPM-outsourcing business growth
eclipsed domestic IT market growth during FY2020, driven by rising work from home requirements for major service sector
companies globally.
Hardware
The computer hardware market growth in India slowed notably in 2020 but remained in positive territory. The Covid-19 pandemic
has created a disproportionate effect on hardware spending in India. On the one hand, low-income households, which saw their
incomes shrink significantly as a result of job losses have likely put off the purchase of their first PCs and laptops, as well as hold off
upgrades of existing devices. Poorer households, which often live in areas where last-mile delivery networks are less adequate and
established, were also unable to purchase devices from online channels. On the other hand, middle-to-upper income households,
which have appeared to have been more economically insulated from the pandemic and have more disposable incomes given the
lesser ability to spend on holidays and hospitality, have spent more heavily on these devices as they invest in remote working and
learning.
Sustained investments by the three principal mobile operators into their 4G LTE networks have also underpinned the proliferation
of low-cost smartphones, which have cannibalised demand for these product categories, especially among poorer households.
However, we maintain that India's huge population and potential for deepening in the hardware segment makes it is one of the
more attractive global hardware opportunities over the medium term. Price sensitivity, nonetheless, remains a key sticking point in
the devices market.
Hardware Market
2019-2026
f = Fitch Solutions forecast. Source: Local sources, Trademap, Fitch Solutions
PC Market
• The slight decline in the PC market in 2020 has been a result of weaker income growth affecting poorer households, offset by
higher spend by more affluent household groups on remote working and learning, as India was put into a lockdown in 2020 to
prevent the spread of the virus. Spending was also supported by businesses to support remote working. Overall, the Indian PC
market is attractive, owing to low levels of device penetration, falling prices and increased consumer spending power. Based on
the latest available data from the National Sample Survey suggests that only 8% of all households in India with at least one
member aged five to 24 has a PC and an internet connection.
• There has also been slight upsides to PC growth as a result of the end of extended Windows 7 support in January 2020, though
some consumers and businesses have also put off these upgrades due to the pandemic impacting incomes and business
revenues, and have continued to use the legacy operating system. Indeed, data from Statcounter suggests that penetration of
Windows 7 PCs only dipped by seven percentage points over the December 2019 to December 2020 period. Windows 7 was still
installed on roughly 27% of all PCs in use in India.
• PC demand could also increasingly be cannibalised in favour of mobile-centric devices, namely smartphones, which could put
PC sales on a permanently lower growth trajectory. This is a clear downside risk for poorer emerging markets like India.
• As well as differences in device trends, there is also a regional dimension to the hardware market in India. An increasing
contribution to growth is expected from smaller cities in India, where vendors are expanding their retail and distribution
presence. Around 45% of new PCs sold in the Indian market are now shipping outside the top 75 cities, and tier-III and tier-IV
cities will be an important growth driver over the next five years. The pandemic, however, has slowed vendor penetration into
these poorer areas.
• The education and government sectors, among others, still have significant demand for desktops, while growing PC penetration
in lower-tier cities should help to maintain demand for some time to come. The education sector represents a significant
potential segment of PC demand. It has been estimated that of India's 1.3mn schools, only around 14% have access to
ICT (information computer technology), defined as having at least one PC for each school.
• Tapping into this low penetration translates to a huge opportunity for PC vendors, even relative to other emerging markets in
Asia Pacific (APAC). The disparity between PC penetration and mobile phone penetration is also striking, and represents a clear
opportunity for vendors to deepen their sales. India's large youth population will also boost PC and IT usage as living standards
rise and income profiles improve.
• Vendors are looking at government schemes in order to boost their sales. Initiatives such as the Digital India programme will fuel
long-term demand for IT hardware. The roadmap for a private government cloud also bodes well for vendors as the government
looks set to continue heavy investment in hardware and services in order to boost its efficiency and effectiveness in reaching out
to more Indian citizens.
• A key risk to the segment is the relatively low level of disposable incomes and the high prevalence of inequality across the
country. Vendors, while making some headway into more rural and disenfranchised parts of the country, remained focus on
expanding their efforts in growing sales in urban and richer regions. The historical lack of action in the distribution of PCs to
economically disadvantaged segments of the population remains a key impediment to market growth.
Desktop OS Market Shares

India - % (December 2020)
Source: Statcounter
• Data from the quarter ending December 2020 suggests that Dell was the largest PC vendor in India, with shipments growing
57.1% y-o-y in the fourth quarter of 2020. This is based off of data released by IDC, and puts the US-based computer vendor at
32.7% PC market share in Q420. It was followed by HP, which grew its sales by 8.8% y-o-y and maintained a market share of
26.7%. The two vendors were ahead of Lenovo, Acer, and Asus, which had shares of 18.4%, 8.5%, and 6.4% respectively in the
fourth quarter of 2020. Total shipments in the quarter were estimated at 2.9mn units.
• Data from Statcounter suggests low penetration of Apple's Mac computing products, which are generally more premium and
command higher prices. Despite the release of a refreshed line-up of desktops and laptops which feature Apple's in-house
designed M1 system-on-a-chip, it appears that Apple's PC market share has not appreciated considerably.
• As the Indian computer hardware market has grown, vendors have increasingly sought to produce 'Made For India' models.
These are now becoming a growing focus for main vendors such as HCL and HP. Typical features suited for Indian conditions
include the ability to be operated on a 2V battery or to withstand extreme weather and dust. More recently, there has also been
fast-paced development in the low-priced end of the tablet market as manufacturers look to produce devices with broad-based
appeal among poorer consumers.
PC Volume Forecast
2019-2026
e/f = Fitch Solutions estimate/forecast. Source: Local sources, Trademap, Fitch Solutions
Printer, Copier And Multifunctional Peripherals
• Printer and copier demand growth underperformed in 2020. This has resulted from the shuttering of many workplaces due to
the pandemic, as well as a transition toward remote working and digital-based software, which reduces the need for paper. There
was also a drag from the greater longevity of hardware and adoption of paperless processes. Some vendors recorded
improvements in personal sales as users purchased printers for home use, although enterprise spending shrunk significantly.
• The slight slowdown in PC sales as well as the ongoing shift toward smartphone-based apps and websites rather than paper-
based processes has contributed to the decline.
Printer And Copier Spending Forecast

2019-2026

Software & Services
Software and services spending was a relative bright spot for India in 2020. The Covid-19 pandemic has accelerated the push by
many companies to digitise their existing operations. While the economy weakened significantly through 2020, we estimate that
spending on IT services remains considerably resilient, despite slight weakness observed in the earlier part of the year when
businesses were gauging the impact of the pandemic on their business operations, and have held back on their IT investments.
The business process outsourcing (BPO) segment had took a considerable hit in the early stages of the government lockdown, as
many could not return to their place of work owing to a restriction on travel and public transit shutdowns. However, we estimate
that the segment has since recovered strongly as businesses around the world outsourced more operations to India, which remains
the premier global BPO hub. There was also development of the cloud ecosystem as foreign companies invested into local data
centre capacity amidst new data localisation and protection laws, as well as ongoing investments from businesses in digitisation.
These investments will be a key foundation to move the Indian IT market toward a higher level of development in the long term.
Software
• In 2020, the pandemic posed challenges for traditional areas of the software market when business confidence plunged, and
non-essential investments were curtailed as businesses awaited more news and certainty about the pandemic. Large on-
premises projects were delayed as efforts were focused on priority areas for IT departments in the private and public sector,
namely those that ensured business continuity during the pandemic. This was an upside for software solutions that enable
remote work, including collaboration, communication, virtualisation and cybersecurity solutions, as well as those that
underpinned the scaling up of socially distanced supply chains and internal process automation.
• One pronounced trend was the acceleration in cloud software adoption, with firms seeking scalable solutions given the urgency
of rollout required to ensure productivity could be maintained when employees began working remotely. Another factor was
greater ease of maintenance and management for cloud applications versus the on-premises model, which was an important
factor during lockdown when site access was at times prohibited.
• We consider India's software market to have a bright medium-term outlook, with the underlying demand driver from enterprise
modernisation momentum supplemented by a deepening of the market as lower-cost cloud software services deepen the
market to SMEs. As the economy grows, there should be more demand for solutions that help to improve efficiency.
• The software market contracted by just -1% in 2020, relatively on par with 2019. The enterprise and government segments have
been preparing for the end of extended Microsoft support for Windows 7 in January 2020. Spending was elevated due to
migration toward Windows 10 OS, as companies sought to ensure access to the latest security patches and feature updates.
• There is, however, some downside from the deepening of the Software-as-a-Service (SaaS) market, as it will cannibalise higher-
value on-premises volume, but this will likely be outweighed by the overall expansion of the enterprise application market in
terms of impact on market value.
Software Market
2019-2026
Enterprise Software
• Companies have invested heavily into remote collaboration software as well as virtual private network (VPN) services to enable
their employees to work remotely effectively. We do expect such demand to taper off in the coming years as vaccinations begin
and the economy returns to some form of normalcy.
• The telecoms, government, manufacturing, and consumer goods and retail markets are key verticals driving demand, with
businesses looking to improve customer service experience, efficiency and decision support. Meanwhile, the business segment
is becoming increasingly important and vendors forecast it may double in size over the next few years.
• The leading sectors for enterprise resource planning (ERP) and enterprise risk management (ERM) applications are
manufacturing, retail banking and financial services, telecoms, IT services/call centres and insurance, as well as state and central
government agencies. As services become increasingly important, particularly in competitive industries such as telecoms, more
companies are adopting customer relationship management (CRM) solutions. Storage and database applications, although still a
relatively small segment, have great growth potential as Indian companies seem to manage increased data flow.
• Investments in the retail segment are another growth area, with the modernisation of retail in India a significant trend as the
government looks to migrate citizens away from unproductive low-value informal retail employment.
• Vendors are also increasingly focused on opportunities in the huge SME sector, where price is an important consideration.
Studies suggest that there are at least 9mn SMEs in India. It is estimated that around 60% of Indian SMEs still use paper-based
systems, but an increasing number are now trying to convert to digital.
• The earliest demand came from suppliers in industries, such as auto parts and ancillaries, where smaller firms were obliged to
implement e-commerce systems to synchronise with their larger customers. However, firms in other sectors, such as transport,
now have a greater awareness about the potential benefits of technology utilisation.
Services
• Domestic demand for IT services remains relatively small in India, compared to India's leading global position as an IT services
exporter through firms such as Infosys, Wipro and TCS that focus most of their attention on procuring customers outside their
domestic market. However, this is expected to gradually change with strong demand coming from both the enterprise and
government segments for a range of IT services, including outsourcing, cloud services and most recently Internet of Things (IoT)
applications.
• Domestic provision of IT services is still typically built around hardware sales, but the consulting element has been growing.
Enterprises are increasingly looking for external advice in prescribing an IT strategy and identifying vendors.
• One group of segment drivers is related to a paradigm shift in the character of the Indian IT industry, with India gradually moving
up the value chain from low-cost service provider to an integrated higher-value global IT services vendor.
Outsourcing
• India is the preeminent global hub of business process outsourcing (BPO) services. Many multinational companies have focused
on investing into local capacity to lower their costs. However, at the moment, the market is skewed toward lower-value services.
The segment is also facing growing competition from other low-cost and nearshore destinations such as Eastern Europe,
Mainland China and South Africa. However, in some verticals, such as auto and manufacturing, Indian companies actually
command a relatively small share of the total available outsourcing market, meaning there is also still scope for growth.
• Potentially tighter restrictions on the issuance of H1-B visas in the US for the tech sector could present a prime opportunity for
India, as US tech companies could outsource even more processes to other markets.
• Traditionally, domestic IT service companies have concentrated on exports. Exports still account for over three quarters of
revenue, but demand is also now growing within the domestic market, including facilities management and even managed
services. Increasingly, local players such as Wipro and TCS are pitching for IT deals from domestic companies, for BPO.
• A key downside risk is evident in the price sensitivity in the domestic market, even among large enterprises and the public sector,
which is contributing to weak demand. As the economy grows and businesses move up the value chain, there should be a
gradual migration of BPO providers toward higher-value and more complex services, as well as higher demand from enterprises
for these sophisticated offerings. India's large pool of semi-skilled labour and relative low-cost advantage create a wealth of
opportunity for multinational companies.
Cloud Computing
• Demand for cloud services is expected to remain robust in India, despite being one of the less developed cloud markets in APAC.
This is given the currently low level of spending on IT in the country, as well as relatively low levels of digitisation. The pandemic
has also had the positive effect of accelerating the transition to the cloud.
• The increased supply of cloud solutions is built on the back of increases in data centre capacity. This was in combination with the
underlying cost rationale, as well as capacity and flexibility improvements offered by cloud services.
• The government is a key customer to many of the local tech majors. The state continues to double down on its digitalisation
plans, namely Digital India, which itself comprises of a multitude of other digital-first initiatives, including MyGov.in, Aadhaar digital
IDs, and e-Cabinet. The central government has also been pursuing the development of a private government cloud
environment available for use by central and state government departments, districts and municipalities to accelerate ICT
service improvements.
• The government's cloud push will ultimately mean multiple private cloud environments, but using the same standards at the
national and state levels and will not require a single service provider or vendor. Central platform standardisation means vendors
can compete for any element of the procurement process and ultimately in the provision of Infrastructure-as-a-Service (IaaS),
Platform-as-a-Service (PaaS) and SaaS.
• While there has also been solid progress in improving supporting infrastructure, including the deployments of more robust fibre
backbones and sustained investment into energy networks, infrastructure remains a key constraint to the further development
of the cloud segment, even toward the short-to-medium term. However, the passing of the National Digital Communications
Policy by the Cabinet in September 2018 could boost the prospects of fibre rollouts toward the medium term.
• Overall growth in server sales slowed a bit in 2018-2019 but trended upwards once again from 2020. The slowdown was due to
IT firms opting to migrate to cloud to host their applications instead of physical infrastructure. However, the long-term
modernisation trend across the industry will likely support the sales of servers over the long term.
Cloud Computing Demand

2019-2026
• Vendor investments continue to drive the market. Amazon Web Services (AWS) announced plans in November 2020 to
launch a second cloud region in Hyderabad by 2022, providing three alternative availability zones to its main Mumbai region.
This followed on plans in announced in February 2020 to pile over USD1.6bn to construct two data centres in Hyderabad. This
will enable the US tech major to exploit demand for enterprise-class cloud computing services across the Indian sub-continent.
In January 2020, Japan-based communications provider NTT Ltd announced a planned investment of USD1.5bn into building
new data centres in India - it plans to add 1.5mn sq ft of new rack space. Microsoft is already present in India with three data
centres to provide Azure and Office 365 services from local facilities.
• Google and Oracle also expanded their data centre capacity in India by adding one new regional cloud service each.
• Challenges of the Indian cloud computing environment are captured in the results of the 2020 Cloud Readiness Index. India did
record an improvement in its overall profile, although it ranks 10th out of 14 markets surveyed. India scored relatively poorly in
infrastructure metrics, highlighting the unreliability of its power grid as well as its poor progress in terms of green energy. Tax as
well as legal risks were also highlighted as factors that could affect data centres situated in the country.
• Meanwhile, in terms of business sophistication, the large outsourcing industry, as well as financial services, present upside for
cloud vendors. However, India's cloud potential is held back by concerns that we have highlighted for several years, namely the
poor quality of broadband infrastructure and insufficient international bandwidth.
• India is a regional laggard in terms of broadband infrastructure investment and we do not expect India to close the gap to its
peers, at least in the medium term. This network infrastructure deficit will push up cloud computing costs for vendors and end-
users, and act as a drag on adoption and market value growth.
India Cloud Readiness Profile

India (2020)
Source: Asia Cloud Computing Association
SaaS
• The SaaS market in India is the largest sub-segment of the cloud computing market, as is the case globally. With increasing
mainstream awareness of the cloud computing models, more Indian businesses are re-evaluating the way they structure their IT
investments.
• The SME cloud market in India is one area in which SaaS models are expected to have a particular impact due to tighter budgets
and the lower level of demand for bespoke software solutions. The Indian SME market is already an important source of demand
for cloud services and some vendors believe that cost-efficient cloud service models have the potential to change the way that
Indian businesses operate.
IaaS/PaaS
• We believe there is considerable opportunity for vendors to tap into demand growth from Indian businesses and government
agencies for help to utilise cloud computing IaaS and PaaS. IaaS is seen as having a steep growth trajectory in India due to the
potential of this business model to help smaller firms keep down the cost of their IT infrastructure. The growth prospects of IaaS
in India are also boosted by the fact that there is relatively low penetration for on-premises infrastructure deployments relative to
more developed markets.
• Major internet service providers and data centre service providers in India such as Bharti Airtel, Sify, NetMagic, and Adani
Group continue to invest in facilities and platforms to support a roll-out of cloud services. New cloud computing offerings are
expected to fuel further demand from local end-users to utilise this technology. At the moment, however, the low level of
broadband penetration and incomplete infrastructure remains a barrier to the widespread promotion of software-on-demand
solutions.
Downside Risks Weigh On Attractiveness

Cloud Readiness Index (2020)
Note: May include territories, special administrative regions, provinces and autonomous regions. Source: Asia Cloud Computing Association
IoT And 5G
• Internet of Things (IoT) remained a nebulous technology for India, even in 2020. IoT refers to the wider implementation of
networked technologies across a range of verticals to track performance in real time, in order to increase efficiency, expand
capabilities and reduce errors. Leading applications from the first wave include asset tracking, connected cars, manufacturing,
healthcare and smart infrastructure.
• We believe there is widespread potential for IoT development in India due to a lack of legacy infrastructure and plans to make
rapid upgrades over the medium term. This will create opportunities for software and services vendors, while telecoms operators
provide the connectivity component of the value chain.
• The government is a key player in the IoT market in India as a result of its control of large infrastructure projects. The
government's National Digital Communications Policy, passed in 2018, highlighted IoT as a key technology to drive growth in the
digital economy. This is a clear sign that the government aims to create a positive environment for adoption of the technology.
Both public and private players are focused on deploying IoT in the agriculture, health services, energy, and security sectors,
among others.
• The government plans to fund the development of resource centres and test-beds as a common experimental facility for
carrying out experiments in order to boost IoT. The government, in partnership with IT industry body NASSCOM and other
industry associations, also plans to set up incubation centres.
• The Department of Telecommunications has yet to announce any plans to auction 5G spectrum, and a March 2021 auction had
focused exclusively on the allocation of 4G-compatible bandwidth. High spectrum prices have been the key hindrance for
operators, although telcos have also noted that mass market appetite for 5G is not yet present.
• Concerns have also emerged that India does not have sufficient mid-band 5G spectrum (3.5GHz) to support advanced
applications. Only 175MHz is expected to be offered to telecoms operators; the remaining spectrum will be reserved for
government agencies, including the Department of Defense and the Department of Space.
Industry Trends And Developments

Key View: India's IT market is substantial and is heavily skewed toward the services segment, given its position as one of the leading
business process outsourcing centres in the world. In recent years, domestic manufacturing of IT devices has increased, following
governmental initiatives to attract foreign investment into domestic production lines. We have a positive outlook on the long-term
potential on the market, though as a manufacturer of lower-end IT hardware, the country will continue to rely heavily on foreign
supply chains to meet its needs for higher-end computing products. Levels of automation are still extremely low, with domestic
manufacturing seen widely by the state as a way to lower unemployment in the country, prompting the need for greater labour
market reforms to move India up the IT value chain. To support growth in the data centre and high-end cloud infrastructure
segments, we also expect greater investment into broadband and reliable power generation and transmission infrastructure.
IT Trade
• Despite being one of the largest economies in the emerging Asia-Pacific (APAC) bloc, on a per-capita basis, the real value of the IT
sector is unevenly distributed, concentrated in the more affluent and resource-rich areas of the country. Few consumers or
businesses have access to advanced IT hardware despite increasing volumes of equipment being manufactured there. The
greatest issue has been the limited growth in disposable incomes in the country.
• For many years India has been a net importer of IT hardware, but the upside to this is that many of the leading global IT vendors
have established deep-rooted links in the country; these relationships are beginning to pay off, with India now becoming a
stronger importer of hardware as the country looks to establish a more credible presence in the cloud computing and digital
security space. Regulatory weaknesses make India a moderately high-risk investment destination.
• India's IT trade deficit was the highest in 2021 at USD31.0bn, up from USD19.6bn in 2020 and a previous high of USD22.0bn in
2019.
• The widening deficit was largely due to a 65% annual increase in the imports of electronics components. This reflects India's
growing status as a low-cost production base for international original equipment manufacturers.
• Notebooks' deficit surged by almost 63% in 2021, components by 50% and servers by 25% which suggests a steady uptick in
domestic assembly, manufacturing and advanced IT demand.
• Indian vendors are beginning to import more components for both foreign and indigenously developed products. We do
highlight, however, that most work done in India continues to be assembly rather than production of hardware components.
• Despite a slight decrease in exports of electronics components - primarily low-value diodes and transistors - in 2021, Indian IT
exports accounted for just over 0.3% of total national exports. This trend has been roughly stable for many years.
INDIA IT HARDWARE TRADE, USDMN (2017-2021)

2017 2018 2019 2020 2021
Trade Balance (USDmn):
IT Hardware -6,054 -6,828 -7,206 -7,536 -11,280
Computer Parts -1,127 -1,239 -1,246 -1,162 -1,747
Electronic Components -7,462 -11,217 -13,551 -10,933 -17,963
Total 14,643 -19,284 -22,003 -19,631 -30,991
Exports (USDmn):
IT Hardware 166 226 225 169 250
Computer Parts 127 115 111 96 132
Electronic Components 413 536 783 565 771
Total 706 877 1118 830 1153
As % Of National Exports 0.2 0.3 0.3 0.3 0.3
Imports (USDmn):
IT Hardware 6,220 7,053 7,430 7,704 11,530
Computer Parts 1,254 1,354 1,357 1,258 1,880
Electronic Components 7,875 11,753 14,334 11,498 18,734
Total 15,349 20,161 23,121 20,461 32,144
As % Of National imports 3.5 4 4.8 5.6 5.6
Source: Intracen, Fitch Solutions
IT Industry Analysis
• India's vast market and growth potential provides the greatest appeal for investors, with the country benefitting from significant
natural resources and an expanding manufacturing base, supported by a huge working-age population and relatively robust
transport connections.
• The opportunities offered by these advantages are accompanied by some significant risks, including a high terrorist threat,
widespread corruption, excessive bureaucracy and weak utility infrastructure, all of which increase the costs and obstacles of
operating in India.
• As the second most populated country in the world, behind only neighbouring Mainland China, India presents investors with a
substantial potential labour pool. The country's minimum wage is relatively competitive and businesses benefit further from a
high degree of labour flexibility. The main labour market risks to businesses are in terms of the poor provision of education at
primary and secondary level. Though enrolment rates have increased in recent years, actual attendance is low and many
children leave school without attaining any basic skills, severely restricting the size of the skilled labour force.
• India's weak literacy rate sees the country fall behind many of its regional peers. Somewhat offsetting this is the high volume of
tertiary education graduates in key fields, such as science and engineering, which reduces the demand for imported skilled
labour and which greatly appeals to investors in the IT space.
• Investors may be deterred mostly by the high level of restrictions placed on foreign ownership and the excessive bureaucracy
that makes opening and closing a business difficult, costly and time-consuming. Further risks stem from corruption, which is
pervasive throughout Indian government bodies and the judicial system, creating a highly uncertain investment environment.
Operational Risk Indices

2022
Note: Scores out of 100; higher score = lower risk. Source: Fitch Solutions
• India generally scores close to the Emerging APAC average in most of our Operational Risk categories. The country continues to
be held back by risks relating to its workforce, with the majority of sectoral employees being of low-skilled status and even
specialised individuals tending to work for large multinational organisations for relatively low wages.
• Though India is home to a number of internationally recognised IT players such as Wipro, Sasken and Infosys, many high-
skilled workers elect to take up positions in other countries, limiting India's level of innovation. The large, low-skilled workforce
does present some upsides to risk, however, as the labour pool is highly flexible and can quickly adapt to new procedures and
customer requirements, while those companies seeking to operate in the country can be assured of low operational costs and
minimal regulatory interference.
• Department for Promotion of Industry and Internal Trade (DPIIT) data indicate that in FY2020/21, cumulative foreign direct
investment in the hardware, software and services sector came in at USD71bn, topping all other categories.
• In June 2020, reports suggested that the Department of Telecommunications push telecoms vendors with existing
manufacturing in India, including Ericsson and Nokia, to manufacture equipment using 100% local components, with the plan
aimed at reducing dependency on foreign-made components and minimising the probability of cyber-espionage by foreign
parties.
• In January 2020, Japanese operator NTT announced plans to invest as much as USD1.5bn into data centre projects in India. The
company currently operates 1.2mn sq ft of capacity across four Indian cities and plans to add 1.5mn sq ft of new space.
• Contract manufacturer Foxconn expanded its assembly capabilities in the country in 2019, catered primarily to the assembly of
Apple handsets. Local media reports in February 2019 further suggest that ZTE is studying plans to begin manufacturing
handsets in India, while Huawei is considering resuming production of its carrier and enterprise products in the country.
Separately, Ericsson is outlining plans to expand its domestic manufacturing capabilities to meet export demand for its telecoms
equipment.
• Data centre investments by foreign cloud providers into India has also maintained its steam. Oracle opened its first data center
in Mumbai in 2019 and the second in Hyderabad in June 2020. The company stated that its data centers have over 15,000
enterprise clients, and that its focus is on Platform-as-a-Service and Infrastructure-as-a-Service workloads. Alibaba Cloud
launched its first data centre in January 2018 in Mumbai, and followed up with a second data centre launch in September 2018.
• In July 2021, Google Cloud stated that it launched its second Cloud Region in Delhi, which comes after Amazon's
announcement in Q420 that it would invest USD2.77bn to open a second cloud infrastructure in India's Hyderabad by Q322.
Pandemic Boosts IT FDI

India - Computer Software & Hardware FDI, INRmn (2012-2021)
Source: DIPP
Government IT Industry Policies
• In India's FY2022/2023 Union Budget presented in Q122, the government outlined plans to boost data centre investments and
construction in the country. The government noted that over USD7bn would be invested into the IT and telecoms market.
• Government schemes are now an important Indian market opportunity for vendors. Initiatives such as the five-year e-
government and smart ID programmes will fuel long-term demand for IT hardware. The roadmap for a private government cloud
also bodes well for vendors as the government looks set to continue heavy investment in hardware and services.
• In April 2020, the government launched the Production Linked Incentive Scheme for Large Scale Electronics Manufacturing to
incentivise makers of electronics components, including Assembly, Testing, Marking and Packaging units to start or build up their
existing domestic manufacturing capacity. It is estimated that around USD16bn worth of IT hardware will be produced under
these schemes over the next four years.
• The government is also earmarking INR80bn (USD1.1bn) for investments into quantum computing technology. The
developments come on the back of investments by other big technology companies, including Samsung and Xiaomi, which
have all established domestic manufacturing lines under the 'Make in India' initiative.
• In the National Digital Communications Policy 2018, the government highlighted three key strategies: Connect India, to improve
the country's digital communications infrastructure, Propel India, to invigorate the growth of disruptive technologies, such as AI,
Internet of Things and 5G, and Secure India, aimed at improving India's cybersecurity capabilities.
• In November 2018, French company Atos was awarded an INR45bn (USD650mn) contract to build 70 supercomputers for
India. Reportedly, the initial few deliveries would feature all imported parts, and subsequent shipments of supercomputers would
feature, to some degree, locally manufactured parts, with Atos partnering with Indian contractors in the cities of Chennai and
Pune for the parts. In following phases of manufacture, the Centre for Development of Advanced Computing would be involved
in the design process. The supercomputers will initially be deployed in Institutes of Information Technology throughout the
country, and will be connected to a common grid.
• As noted above, government policies and incentives are key to the development of the local IT industry and Narendra Modi's
government has been pushing for greater open accessibility to important national projects. IT is seen as an essential tool for
developing and diversifying the Indian economy. However, a lack of regulatory cohesion and the ability of the individual state
governments to pick and choose the degree to which they allow international companies to collaborate stands as the principal
barrier to these aims.
• Structural issues, such as the lack of transmission and broadband infrastructure, coupled with a bureaucratic operating
environment continue to pose challenges to businesses seeking to invest and operate in the Indian market.
Competitive Landscape
India IT Companies
Tata Consultancy Services
Tata Consultancy Services (TCS) is India's leading IT services, consulting and business solutions company, and a major player on
the global stage. A subsidiary of the influential Tata Group conglomerate, TCS is listed on the Bombay Stock Exchange and the
National Stock Exchange of India. As of August 2019, the company had a market capitalisation of INR8.4trn (USD116.5bn), making it
the most valuable company in India.
Established in 1968, TCS has grown both organically and through acquisitions and now comprises 50 subsidiaries (as of FY2020,
ending March 2020), which provide a wide range of IT-related products and services, including application development, business
process outsourcing, capacity planning, consulting enterprise software, payment processing, software management and
technology education services. TCS stated that demand for its cloud services has jumped amid the Covid-19 pandemic, and has
said it has been quick to deploy remote workplace solutions for its clients to support the surge in demand for telecommuting
platforms.
TCS has made little headway in terms of acquisitions in FY2019/20. In June 2019, TCS increased its stake in its Japanese joint
venture with Mitsubishi Corporation by an additional 15% to 66%. In November 2018, TCS made two acquisitions. It first
acquired London-based digital design studio W12 Studios for an undisclosed sum as part of its broader efforts to boost its digital
and creative design capabilities. It also bought US-based management consulting company BridgePoint Group, which specialises
in retirement services. TCS has stated that the acquisition will augment its knowledge in the financial and insurance services
domain.
In September 2017, TCS unveiled its new Business 4.0 thought leadership framework to help its clients identify and adopt new
digital technologies such as artificial intelligence (AI) and blockchain. As part of its Agile model, TCS also introduced its Machine First
Delivery Model (MFDM) to integrate analytics, AI and automation into its clients' existing business processes to create more efficient
and effective machine-driven models.
Revenue Growth Remains Strong

TCS - Revenue & Net Income, INRmn (FY2014-FY2020)
Note: Financial year ends March (ie, FY2020 = financial year ending March 2020). Source: TCS, Fitch Solutions
Infosys
Infosys is India's second-largest IT services and solutions vendor in terms of revenues, and at the end of FY2020 had 1,458 clients
and employed over 239,000 people. Headquartered in Bangalore, the company has a multinational presence across 46 key
emerging and mature markets around the world. As of August 2020, Infosys had a market capitalisation of INR4.0trn (USD54.5bn).
Infosys provides software development, maintenance and independent validation services to companies in industry verticals such
as banking, finance, insurance, and manufacturing, among others. Infosys' end-to-end business solutions include:
• Consulting Services.
• Business Application Services - enterprise system implementation and services, digital solutions and services, data analytics,
business process management.
• Technology Services - application development, modernisation and management, cloud infrastructure and security, engineering
services, enterprise mobility, Internet of Things (IoT), software testing.
• Outsourcing Services - application outsourcing, business process outsourcing (including customer service, finance and
accounting, human resources), sourcing and procurement process outsourcing.
Infosys' products and platform solutions include Mana, the Infosys Information Platform (IIP), the Edge product suite, Skava, Panaya
and Finacle, a leading universal banking solution. In March 2015, Infosys acquired for USD225mn 100% of US-based Panaya, a
leading provider of automation technology for large-scale enterprise and software management. Panaya's CloudQuality suite
positions Infosys to bring automation to several of its service lines via an agile SaaS model and helps mitigate risk, reduce costs and
shorten time to market for clients.
Infosys has stated that the impact of the Covid-19 pandemic to its Q4FY19/20 business has not been significant, though it does
anticipate a slowdown in client technology spending in the near term, in light of weaker economic growth. The company sees long-
term opportunities in the acceleration of digital transformation initiatives.
In 2018, the company began to adopt a four-pronged strategy to strengthen its relevance to clients and drive accelerated value
creation. The four pillars are: scale agile digital through investments in its digital capabilities, energise the core by looking at
transformation initiatives such as new technologies, including AI, reskill its employees, and expand localisation by opening new
operation hubs globally to cater to different markets.
In August 2020, Infosys signed a five-year agreement with cloud customer experience and contact centre solutions
provider Genesys to expand its capabilities to customers. In April 2019, Infosys formalised a joint venture with Hitachi, Panasonic
and Pasona to enhance its presence among Japanese corporations. The new joint venture, named HIPUS, will assist Japanese
companies with end-to-end digital procurement platforms. In October 2018, Infosys completed the acquisition of Fluido, the
largest Salesforce consulting partner in the Nordics, to strengthen its position as a leading Salesforce enterprise cloud services
provider. The company plans to leverage Fluido's client relationships to expand its presence in the region. Fluido has clients across
industries, including manufacturing, retail, energy, and telecommunications. The acquisition was for a total consideration of
EUR65mn (USD72mn).
In September 2017, Infosys completed the acquisition of UK-based Brilliant Basics for around GBP7.5mn. Brilliant Basics
specialises in customer experience and product design. In November 2015, Infosys acquired 100% of Noah Consulting, a leading
provider of advanced information management consulting services for the oil and gas industry. This acquisition combines Noah's
industry knowledge, information strategy planning, data governance and architecture capabilities with Infosys' ability to provide
technology and outsourcing services on a global scale to oil and gas clients.
Business Growth Reflected In Strengthening Financials

Infosys - Revenue & Net Income, INRmn (FY2014-FY2020)
Note: Financial year ends March (ie, FY2020 = financial year ending March 2020). Source: Infosys, Fitch Solutions
Wipro
Wipro is an India-based provider of IT solutions and services for global clients. Active in the sector since 1981, the company as of
FY2020 had over 180,000 employees and was present in more than 55 markets worldwide. Wipro provides a broad range of
services, including digital strategy advisory, customer-centric design, technology consulting, custom application design,
development, re-engineering and maintenance, systems integration, package implementation, infrastructure services, business
process services, cloud, mobility and analytics services, research and development and design of hardware and software.
Wipro offers its customers a variety of commercial models including time and material, fixed price, capacity based, as-a-service and
outcome-based models. The company offers these services globally by leveraging its products, platforms, partnerships and
solutions including state-of-the-art automation technologies such as its proprietary cognitive intelligence tool, Wipro HOLMES. In
June 2019, Wipro announced the acquisition of US-based digital engineering and manufacturing solutions company International
TechneGroup Incorporated (ITI). The USD45mn acquisition is part of Wipro's strategy to further offer end-to-end solutions in
disruptive Industry 4.0 technologies to its clients, and ITI's services will be consolidated as part of Wipro's Industrial and Engineering
Services division.
Wipro warned that the Covid-19 pandemic could adversely affect its clients' spending on technology and impact demand for
prospective projects and ramp-ups, increase requests for furloughs, increase pricing pressure, and impact cash conversion cycles.
The company has declined to provide guidance on its results moving forward, citing the unpredictability of the duration and severity
of the pandemic.
In July 2020, Wipro announced that it would acquire Salesfore implementation partner 4C for EUR68mn (USD80.9mm). 4C is
headquartered in Belgium, and is one of the largest Salesforce partners in the UK, Europe and Middle East region. In the same
month, it acquired IVIA Serviços, a Brazillian IT services provider in the financial services and manufacturing sectors, for
USD22.4mn.
In February 2019, Wipro stated that it would sell its Workday and Cornerstone OnDemand HR practices to US-based HR and finance
solutions provider Alight Solutions for a total of USD110mn. The sale follows its July 2018 acquisition of the Indian arm of Alight
for a total consideration of USD117mn, with Wipro taking on responsibility for the services delivered from Alight's India locations. In
September 2018, Wipro won a 10-year USD1.5bn deal from Alight to transform its digital offerings across an entire spectrum
including HR and finance. Wipro has been actively soliciting a broader client base.
In March 2018, Wipro invested USD2.2mn for a minority stake in AI start-up Avaamo. The US-based start-up provides an AI-driven
enterprise bot platform which helps companies deploy enterprise bots to their employees and customers. In February 2016, Wipro
acquired HealthPlan Services, a provider of technology platforms and a fully integrated Business Process as a Service (BPaaS)
solution to health insurance companies (Payers) in the individual, group and ancillary markets. HealthPlan Services provides US
Payers with a diversified portfolio of health insurance products delivered through its proprietary technology platform.
In January 2016, Wipro acquired Germany-based Cellent, an IT consulting and software services company offering IT solutions and
services to customers in Germany, Switzerland and Austria. Cellent provides Wipro with scale and customer relationships, in the
Manufacturing and Automotive domains in Germany, Switzerland and Austria. In August 2015, Wipro acquired Denmark-based
Designit, a global strategic design firm specialising in designing transformative product-service experiences. The acquisition will
strengthen Wipro's digital offerings, combining engineering and transformative technology with human centred-design methods.
Sales Performance On Upward Trajectory

Wipro - Revenue & Net Income, INRmn (FY2014-FY2020)
Note: Financial year ends March (ie, FY2020 = financial year ending March 2020). Source: Wipro, Fitch Solutions
HCL Infosystems
Founded in 1976, HCL Infosystems had established itself as one of India's leading companies in the areas of services and ICT
systems integration. Over the years, the company has developed specialised expertise across verticals, including telecoms, BFSI, e-
governance and power.
HCL Infosystems' range of IT products and services includes computing, storage, networking, security, telecoms, imaging and retail.
During FY2019, the company undertook further consolidation, and focused on its Enterprise Distribution, Consumer Distribution,
Overseas Services and System Integration businesses. This follows on its FY2014 restructuring to exit its loss-making Computing
Products and Hardware Solutions businesses. HCL also changed its focus in its Systems Integration business from growth to
disciplined execution of existing projects and revamped the business model of its Learning business from a hardware-driven asset-
heavy model to a content-driven asset-light model.
In June 2018, Apple terminated its distribution agreement with the company effective March 2019. As revenues remain under
pressure and the company's overall fiscal future grows bleak, the firm is looking to sell its Dubai-based HCL Infosystems
MEA FZE subsidiary. Revenues continued to decline over the past few years with profitability sinking y-o-y due to structural
challenges.
Focused On Narrowing Losses

HCL Infosystems - Revenue & Net Income, INRmn (FY2014-FY2019)
Note: Financial year ends March (ie, FY2021 = financial year ending March 2021). Source: HCL Infosystems
Retailers
Electronics
The growing popularity of online retail is likely to have an adverse effect on conventional electronics retailers. Price advantage and
fast deliveries are luring Indian customers, and some bricks-and-mortar players are reconsidering their plans. Croma, a subsidiary of
Tata Group, is shelving plans for an aggressive nationwide expansion and is planning to focus on growing in the locations where it
already operates 120 stores across 25 cities. Reliance Digital, the largest physical retailer of consumer electronics and household
appliances in India, is proceeding with its business model, which includes a widespread store expansion. At the end of FY2019,
Reliance Digital had 357 stores across 166 cities.
Smartphone sales buoy the electronics retail business and encourage retailers to focus on this particular product segment, striking
deals with manufacturers and seeking ways to diversify the offering. The government's move to further relax foreign direct
investment limits on single brand retail, and the removal of local sourcing requirement norms will further benefit international
smartphone vendors, such as Apple, to open up their own retail stores— a much-coveted prospect for global conglomerates,
which have been hit by a consumption slowdown in Mainland China.
In February 2020, Amazon made a long-term business agreement with local retailer Future Retail, extending the local retailer’s
reach beyond its 1,500 physical locations within India by leveraging Amazon’s platform. Amazon has become Future Retail’s
authorised online sales channel, covering its Big Bazaar and Food Hall grocery and lifestyle chains. The product focus covers several
product categories. In March 2021, an Indian trade group representing 150,000 mobile phone stores sent a letter to Prime Minister
Narendra Modi urging him to investigate Amazon's business practices in the country and impose a daily cap limit on a single seller's
online smartphone sales. The trade group alleges that Amazon has given preferential treatment to a small group of sellers on its
Indian platform for years.
Xiaomi sells smartphones, mobile apps, laptops, bags, trimmers, earphones, Mi Television, Shoes, fitness bands and other products
in India. The company's retail network includes Mi Homes, Mi Studios and Mi Stores. Xiaomi has become the leader of single-brand
retail network with the largest exclusive brand retail network in India. In 2019, Xiaomi announced that Mi.com, the company’s online
retail platform, became the top single brand online smartphone channel. There are currently 70 Mi Home stores and approximately
7,500 authorised dealers. The company is expanding its India product portfolio to include pricier, high-spec smartphones and smart
TVs.
MAJOR ELECTRONICS RETAIL COMPANIES

Company Parent/Ownership Sub-Sector Revenue Stores
Infiniti Retail, owned by

Croma Consumer Electronics INR166.4mn 112
Tata Group
Reliance Digital Reliance Industries Consumer Electronics na 1,862
Xiaomi Xiaomi Corporation Consumer Electronics CNY175bn 70
na = not available. Source: Company reports, Fitch Solutions
E-Commerce
The e-commerce sector has been the main change in India's retail market in recent years and it is expected to continue to grow at a
phenomenal rate. Due to limitations on the activity that international retailers are allowed to undertake in the market, e-commerce
has been driven by local firms such as Flipkart and Snapdeal. Many Indian brick-and-mortar retailers are also entering the e-
commerce segment because of the rising mobile penetration in the country. In January 2019, Reliance Industries announced
that it would be launching its own e-commerce platform in collaboration with Reliance Retail. Online retailers are also increasingly
targeting this market with e-commerce websites. Retailers involved in this area include Snapdeal, Myntra and Voonik.
The government's regulations on e-commerce have tightened. The Indian government announced the introduction of new e-
commerce guidelines and rules, which will place restrictions on foreign e-commerce companies operating in India, effective from
February 1 2019. The rules will ban online retailers from selling products from companies or affiliates in which they own an equity
interest. Furthermore, inventory of a vendor will be deemed to be controlled by the e-commerce company if more than 25% of
purchases of the vendor are from the marketplace entity. E-commerce companies are also restricted from entering into exclusive
merchandise deals with their partners.
US e-commerce behemoth Amazon is in the most danger as a result of these new rules, considering that most of the major sellers
on the site are companies that it has invested in, including Cloudtail and Appario. Amazon cut its stake in Prione Business
Services, Cloudtail’s parent company, to 24% on February 6 2019, meeting regulations preventing e-commerce companies from
owning 25% of the sellers using their platform. Amazon has thus far invested nearly USD7bn in the Indian market, after it increased
its investment by USD2bn in June 2018.
Attracted by the large and growing e-commerce market in India, in May 2018 Walmart acquired a 77% stake in Flipkart for
USD16bn, leveraging on the most successful Indian start-up company in terms of fund-raising, valuation and employment creation.
Flipkart retains its market position after securing USD2.5bn in funding from Japanese investor Softbank, which is also known for
backing China's Alibaba. This is the second of its major funding, after receiving USD1.4bn in funding from China's Tencent, eBay
and Microsoft. The investment will also see Flipkart taking control of eBay India, which will remain an independent e-commerce
website. In a bid to strengthen its logistics service and support its last-mile delivery, Flipkart's subsidiary Instakart Services is set to
invest INR9.9bn in setting up a logistics hub in West Bengal.
SELECT E-COMMERCE RETAILERS AND ONLINE MARKETPLACES

Company Majority Owner Sub-Sector Notes
Flipkart Walmart (77%) General Walmart acquired a 77% stake in Flipkart for USD16bn in May 2018.
Snapdeal Jasper Infotech Pvt General Investors include Alibaba, Foxconn and Softbank.
Shopclues Clues Network Pvt General Investors include Singapore's GIC.
Amazon India Amazon General

In August 2019, Amazon was in talks to acquire a stake in Reliance Retail.
Source: Company reports, Fitch Solutions
India Demographic Outlook

Demographic analysis is a key pillar of our macroeconomic and industry forecasting model. The total population is a key variable in
consumer demand, and an understanding of the demographic profile is essential to understanding issues ranging from future
population trends to productivity growth and government spending requirements.
The accompanying charts detail the population pyramid for 2019, the change in the structure of the population between 2019 and
2050 and the total population between 1990 and 2050. The tables show indicators from all of these charts, in addition to key
metrics such as population ratios, the urban/rural split and life expectancy.
Population
India - Population, mn (1990-2050)
e/f = Fitch Solutions estimate/forecast. Source: World Bank, UN, Fitch Solutions
Population Pyramid
India - 2019 Male vs Female Population, '000 (LHS) & 2019 vs 2050 Population, '000 (RHS)
Source: World Bank, UN, Fitch Solutions
POPULATION HEADLINE INDICATORS (INDIA 1990-2025)

Indicator 1990 2000 2005 2010 2015 2020e 2025f
Population, % y-o-y 1.78 1.59 1.36 1.12 0.99 0.88
Population, total, male, '000 453,257.4 549,387.9 597,052.2 642,164.2 681,223.3 717,101.0 750,331.5
Population, total, female, '000 420,020.4 507,187.7 550,557.7 592,117.0 628,929.1 662,903.4 694,680.1
Population, total, '000 873,277.8 1,056,575.5 1,147,609.9 1,234,281.2 1,310,152.4 1,380,004.4 1,445,011.6
Population ratio, male/female 1.08 1.08 1.08 1.08 1.08 1.08 1.08
KEY POPULATION RATIOS (INDIA 1990-2025)
Indicator 1990 2000 2005 2010 2015 2020e 2025f
Dependent ratio, % of total working age 71.7 64.2 59.9 56.0 51.6 48.7 46.5
Dependent population, total, '000 364,769.0 413,030.0 430,092.5 443,005.6 446,183.3 451,737.5 458,864.3
Active population, % of total population 58.2 60.9 62.5 64.1 65.9 67.3 68.2
Active population, total, '000 508,508.8 643,545.6 717,517.5 791,275.6 863,969.1 928,266.8 986,147.3
Youth population, % of total working age 65.2 57.0 52.4 48.1 43.1 38.9 35.5
Youth population, total, '000 331,545.8 366,904.8 375,719.6 380,285.2 372,623.1 361,017.6 349,629.3
Pensionable population, % of total working age 6.5 7.2 7.6 7.9 8.5 9.8 11.1
Pensionable population, '000 33,223.2 46,125.2 54,372.9 62,720.4 73,560.3 90,720.0 109,235.1
URBAN/RURAL POPULATION AND LIFE EXPECTANCY (INDIA 1990-2025)
Indicator 1990 2000 2005 2010 2015 2020e 2025f
Urban population, % of total 25.5 27.7 29.2 30.9 32.8 34.9 37.4
Rural population, % of total 74.5 72.3 70.8 69.1 67.2 65.1 62.6
Urban population, '000 223,096.3 292,322.8 335,503.8 381,763.2 429,428.7 481,980.3 540,188.7
Rural population, '000 650,181.5 764,252.8 812,106.2 852,518.0 880,723.7 898,024.1 904,822.9
Life expectancy at birth, male, years 57.5 61.7 63.7 65.7 67.5 68.7 69.6
Life expectancy at birth, female, years 58.2 63.3 65.4 67.7 69.8 71.2 72.4
Life expectancy at birth, average, years 57.9 62.5 64.5 66.7 68.6 69.9 70.9
POPULATION BY AGE GROUP (INDIA 1990-2025)
Indicator 1990 2000 2005 2010 2015 2020e 2025f
Population, 0-4 yrs, total, '000 121,958.6 127,837.3 129,543.0 128,212.3 118,983.3 116,879.5 116,147.7
Indicator 1990 2000 2005 2010 2015 2020e 2025f
Population, 85-89 yrs, total, '000 881.0 1,390.6 1,743.9 2,185.9 2,817.9 3,531.1 4,341.3
Population, 90-94 yrs, total, '000 217.9 344.0 437.4 570.1 760.0 993.0 1,277.2
Population, 95-99 yrs, total, '000 35.4 63.1 89.7 118.9 164.9 223.2 298.8
Population, 100+ yrs, total, '000 7.0 12.9 16.6 24.2 34.0 47.9 66.3
POPULATION BY AGE GROUP % (INDIA 1990-2025)
Indicator 1990 2000 2005 2010 2015 2020e 2025f
Population, 0-4 yrs, % total 13.97 12.10 11.29 10.39 9.08 8.47 8.04
Population, 100+ yrs, % total 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Information Technology Methodology

Industry Forecast Methodology
Fitch Solutions’ industry forecasts are generated using the best-practice techniques of time-series modelling and causal/
econometric modelling. The precise form of model we use varies from industry to industry, in each case being determined, as per
standard practice, by the prevailing features of the industry data being examined.
Common to our analysis of every industry is the use of vector autoregressions. They allow us to forecast a variable using more than
its own history as explanatory information. For example, when forecasting oil prices, we can include information about oil
consumption, supply and capacity.
When forecasting for some of our industry sub-component variables, however, using a variable's own history is often the most
desirable method of analysis. Such single-variable analysis is called univariate modelling. We use the most common and versatile
form of univariate models: the autoregressive moving average model (ARMA).
In some cases, ARMA techniques are inappropriate because there is insufficient historic data or data quality is poor. In such cases we
use either traditional decomposition methods or smoothing methods as a basis for analysis and forecasting.
We mainly use OLS estimators, and in order to avoid relying on subjective views and encourage the use of objective views, Fitch
Solutions uses a 'general-to-specific' method. We mainly use a linear model, but simple non-linear models, such as the log-linear
model, are used when necessary. During periods of 'industry shock' (for example, poor weather conditions impeding agricultural
output), dummy variables are used to determine the level of impact.
Effective forecasting depends on appropriately selected regression models. Fitch Solutions selects the best model according to
various different criteria and tests, including but not exclusive to:
• R2 tests explanatory power; adjusted R2 takes degree of freedom into account

• Testing the directional movement and magnitude of coefficients
• Hypothesis testing to ensure coefficients are significant (normally t-test and/or P-value)
• All results are assessed to alleviate issues related to auto-correlation and multi-collinearity
Fitch Solutions uses the selected best model to perform forecasting.
Human intervention plays a necessary and desirable role in all of Fitch Solutions' industry forecasting. Experience, expertise and
knowledge of industry data and trends ensure analysts spot structural breaks, anomalous data, turning points and seasonal features
where a purely mechanical forecasting process would not.
Industry-Specific Methodology
A number of criteria drive our forecasts for each Information Technology (IT) variable.
IT forecasting is complicated due to the fragmented nature of the market, with little transparency of vendor data and low apparent
agreement between many sets of figures in terms of market definition, base and methodology. In addition, forecasts are affected by
consideration of a variety of internal and external political and economic factors.
Within best-practice techniques of time-series modelling, our quarterly updated forecasts are improved substantially by intimate
knowledge of the prevailing features of each local market.
Risk/Reward Index Methodology
Individual variables taken into account in creating each forecast include:
• Overall economic context, GDP and demographic trends

• Underlying 'information society' trends
• Projected GDP share of industry
• Maturity of market structure
• Regulatory developments and government policies
• Developments in key client sectors such as telecommunications, banking and e-government
• Technological developments and diffusion rates
• Exogenous events
Estimates are calculated using our own macroeconomic and demographic forecasts.
Sources
Additional sources used in IT reports include national ministries and ICT regulatory bodies, national industry associations, and
international industry organisations such as the International Telecommunication Union (ITU), officially released company results
and figures, and international and national industry news agencies.
Fitch Solutions’ proprietary Risk/Reward Index (RRI) provides a comparative regional ranking system evaluating the ease of doing
business and the industry-specific opportunities and limitations for potential investors in a given market. The RRI system divides into
two distinct areas:
Rewards: Evaluation of the industry's size and growth potential in each market, and broader industry/market characteristics that
may inhibit its development. This is further broken down into two sub-categories:
• Industry Rewards. This is an industry-specific category taking into account current industry size and growth forecasts, the
openness of market to new entrants and foreign investors, to provide an overall score for potential returns for investors.
• Country Rewards. A category factoring in favourable political and economic conditions for the industry.
Risks: Evaluation of industry-specific dangers and those emanating from the political/economic profile that call into question the
likelihood of anticipated returns being realised over the assessed time period. This is broken down into two sub categories:
• Industry Risks. This is an industry-specific category whose score covers potential operational risks to investors, regulatory issues
inhibiting the industry and the relative maturity of a market.
• Country Risks. A category in which political and economic instability, unfavourable legislation and poor overall business
environment are evaluated to provide an overall score.
We take a weighted average, combining risks or rewards. These two results in turn provide an overall Risk/Reward Index score, which
is used to create our regional ranking system for the risks and rewards of involvement in a specific industry in a particular market.
For each category and sub-category, each market is scored out of 100 (100 being the best), with the overall Risk/Reward score a
weighted average of the total score. As most of the markets evaluated are considered to be emerging markets, our score is revised
on a quarterly basis. This ensures the score draws on the latest information and data across our broad range of sources, and the
expertise of our analysts.
Industry-Specific Methodology
In constructing these indices, the following indicators have been used. Almost all indicators are objectively based.
IT RISK/REWARD INDEX INDICATORS

Rationale
Rewards
Industry Rewards
IT market value, USDbn Denotes breadth of IT market. Large markets score higher than smaller ones.
Sector value growth, % y-o-y Denotes sector dynamism. Scores based on annual average growth over five-year forecast period.
Denotes spending boost provided by public sector, which can be a crucial determinant of industry
Government initiatives and spending
development.
Denotes maturity of market. A high proportion of hardware sales, compared to services/software,

Hardware, % of total sales
indicates that the overall IT market is immature.
Country Rewards
Urban-rural split Urbanisation is used as a proxy for development. Mainly rural markets score lower.
GDP per capita, USD A high GDP per capita supports long-term industry prospects.
Overall score for Country Rewards is also affected by the coverage of the power transmission network across the market.
Risks
Industry Risks
Markets with fair and enforced IP regulations score higher than those with endemic
Intellectual property (IP) laws
counterfeiting.
Subjective evaluation of official policy towards IT development, as enshrined in statute and tax
ICT policy
code.
Country Risks
Score from Fitch Solutions' Country Risk Index (CRI). It evaluates the vulnerability to external
Short-term external risk
shock, which is the principal cause of economic crises. Such a crisis would cut investment.
Score from CRI, to denote risk of currency crisis and stability of banking sector. The former would
Short-term financial risk
hit revenues in hard currency, while the latter would curtail investment funding.
Trade bureaucracy Score from CRI to denote ease of trading with the market.
Score from CRI denotes the strength of legal institutions in each market - security of investment
Legal framework
can be a key risk in some emerging markets.
Bureaucracy Score from CRI denotes ease of conducting business in the market.
Score from CRI denotes the risk of additional illegal costs/possibility of opacity in tendering/
Corruption
business operations affecting companies' ability to compete.
Source: Fitch Solutions
Weighting
Given the number of indicators/datasets used, it would be wholly inappropriate to give all sub-components equal weight. The
following weighting has been adopted.
WEIGHTING OF COMPONENTS
Component Weighting, %
Rewards 70, of which
- Industry Rewards 65
- Country Rewards 35
Risks 30, of which
- Industry Risks 40
- Country Risks 60
Source: Fitch Solutions
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Industry Trends And Developments .....................................................................................................................................23

India Demographic Outlook .....................................................................................................................................................36

Information Technology Methodology.................................................................................................................................39

Robust Growth Envisaged

f = Fitch Solutions forecast. Source: Intracen, local sources, Fitch Solutions

Latest Updates And Industry Developments

f = forecast. Source: Fitch Solutions

Purchasing Power And Demographic Trends

f = Fitch Solutions forecast. Source: Local sources, Fitch Solutions

ENTERPRISE TRENDS - GVA BY VERTICAL (INDIA 2020-2026)

IT INDUSTRY - HISTORICAL DATA AND FORECASTS (INDIA 2020-2026)

f = Fitch Solutions forecast. Source: Local sources, Trademap, Fitch Solutions

Desktop OS Market Shares

Printer, Copier And Multifunctional Peripherals

Printer And Copier Spending Forecast

f = Fitch Solutions forecast. Source: Local sources, Trademap, Fitch Solutions

Software & Services

f = Fitch Solutions forecast. Source: Local sources, Trademap, Fitch Solutions

Cloud Computing Demand

f = forecast. Source: Fitch Solutions

India Cloud Readiness Profile

Source: Asia Cloud Computing Association

Downside Risks Weigh On Attractiveness

Industry Trends And Developments

INDIA IT HARDWARE TRADE, USDMN (2017-2021)

Trade Balance (USDmn):

IT Hardware -6,054 -6,828 -7,206 -7,536 -11,280

Computer Parts -1,127 -1,239 -1,246 -1,162 -1,747

Electronic Components -7,462 -11,217 -13,551 -10,933 -17,963

Total 14,643 -19,284 -22,003 -19,631 -30,991

IT Hardware 166 226 225 169 250

Computer Parts 127 115 111 96 132

Electronic Components 413 536 783 565 771

Total 706 877 1118 830 1153

As % Of National Exports 0.2 0.3 0.3 0.3 0.3

IT Hardware 6,220 7,053 7,430 7,704 11,530

Computer Parts 1,254 1,354 1,357 1,258 1,880

Electronic Components 7,875 11,753 14,334 11,498 18,734

Total 15,349 20,161 23,121 20,461 32,144

As % Of National imports 3.5 4 4.8 5.6 5.6

Source: Intracen, Fitch Solutions

Operational Risk Indices

Pandemic Boosts IT FDI

Government IT Industry Policies

Tata Consultancy Services

Revenue Growth Remains Strong

operation hubs globally to cater to different markets.

Business Growth Reflected In Strengthening Financials

Sales Performance On Upward Trajectory

Focused On Narrowing Losses

MAJOR ELECTRONICS RETAIL COMPANIES

Infiniti Retail, owned by

Reliance Digital Reliance Industries Consumer Electronics na 1,862

Xiaomi Xiaomi Corporation Consumer Electronics CNY175bn 70

na = not available. Source: Company reports, Fitch Solutions

SELECT E-COMMERCE RETAILERS AND ONLINE MARKETPLACES

Shopclues Clues Network Pvt General Investors include Singapore's GIC.

Amazon India Amazon General

Source: Company reports, Fitch Solutions

India Demographic Outlook

Source: World Bank, UN, Fitch Solutions

POPULATION HEADLINE INDICATORS (INDIA 1990-2025)

Population, % y-o-y 1.78 1.59 1.36 1.12 0.99 0.88