The year of growth

Much to the surprise (or indifference) of many who follow the business media,
deep below all the outsourcing news, the backlash, the Sensex and Infy stock, Mr
Premji's wealth...there's a little something that's the foundation of the
Indian IT powerhouse. That's the domestic market.

Indian IT was all about SURVIVAL in 2001-02. The next year was the REVIVAL.
We try to capture in one word the essence of that year, and we're perhaps
disproportionately influenced by a shrinking domestic market that's just a
third of the total pie. Why else would we call 2003-04 the year of GROWTH, when
software exports growth actually came down a few points* thanks to the
appreciating rupee (it was stable in dollar terms)?

Well, because we think what's happened last year is a really big deal. The
domestic market grew faster than software exports last year.

Let's review the figures that make up this issue's cover. Over the past
three years, while exports growth had kept to the twenties, buoyed by BPO (and
hardware exports), domestic growth had dropped to zero in 2001-02. It went up to
9 percent in 2002-03.

It doesn't take a genius to figure that a few years of this, and the
domestic slice of the pie would shrink, even though some absolute growth kept
happening. The domestic slice dropped gradually from 87 percent in 1990 to 33
percent in 2003. I'd predicted a year ago that we'd be sitting on a 31
percent slice this year. Well, I'm delighted to be proved wrong. From zero
growth to nine percent to an impressive 24 percent, the domestic market has
matched the growth of software exports (in dollar terms). Include BPO and
hardware exports, and talk in rupees, and both exports and the domestic market
have grown at an equal 24 percent.

For the first time in ten years, the domestic slice of the Indian IT pie has
not shrunk! The pie has been frozen in time-for now-at 64-36.

Now then, it's not exactly grown either. So you may think it's premature
to get the champagne out. I think not. This is big. While a slice in a pie may
appear to compete with the other slices, exports is not, finally,
"competition" for the domestic market. The big deal is the 24 percent
growth-among the highest in the world, and on a healthy base, at that.

Hidden not too deep in all this growth is a clear validation of the global
economy. While India becomes a global software hub and back-office, MNCs like
IBM and HP win mega outsourcing deals from Indian telcos, banks and others, and
show near-triple-digit growth in PC numbers. As the US-based Business 2.0
magazine titled its recent cover story on outsourcing and India: "It's
the global economy, stupid." You can say that again. It's Global. It's
Growing. And it's Good.