Software exports from STPI-registered units increased from Rs. 2,15,264 crores in 2010-11 to Rs. 8,48,398.2 crores in 2022-23, registering a growth by nearly four times in these 13 years. Karnataka, Haryana, Telangana, Tamil Nadu, Maharashtra, and Uttar Pradesh together accounted for nearly 95% of the total software exports from STPIs in India in 2021-22 and 2022-23.
India stands as the premier global offshoring destination for Information Technology (IT) firms, highlighting its prowess in the IT and IT-enabled services (IT/ITES) domain. India’s IT-ITeS sector, renowned globally, is a powerhouse of innovation and economic growth. Known for its skilled workforce and competitive pricing, the sector encompasses IT services, software products, engineering services, and business process management (BPM). Major hubs like Bengaluru, Hyderabad, and Pune host numerous multinational corporations and startups.
This sector is pivotal to India’s economy, contributing a significant 7.4% to the GDP in FY 2022 and employing more than 5 million people, with projections reaching 9.5 million by 2026. Key government initiatives like the Software Technology Park of India Scheme, Digital India and the National Policy on Software Products (2019) bolster this growth, as per the government sources. As India strives to become a developed nation by 2047, the IT/ITES sector presents multiple investment opportunities, driving innovation and technological advancements. In this backdrop, we look at the performance of the sector, examining its contributions to the economy, and employment generation. The data for this analysis is sourced from Dataful.
The government plays a crucial role in fostering a robust IT ecosystem through various initiatives. Key among them are the Software Technology Parks of India (STPI) and Special Economic Zones (SEZ).
Software Technology Parks of India (STPI): Established in 1991 under the Ministry of Electronics and Information Technology (MEITY), STPIs promote the development and export of software and IT-enabled services. They focus on equitable IT-led growth, innovation, and software product development, boosting IT-ITeS exports.
Special Economic Zones (SEZ): Introduced in 2000, SEZs replaced Export Processing Zones (EPZ) to enhance export performance. Governed by the SEZ Act of 2005, these zones have driven employment, investment, and exports.
STPIs and SEZs differ primarily in focus and scope. STPIs are sector-specific, promoting the development and export of software and IT-enabled services, while SEZs are not sector-specific and cater to various industries, including manufacturing and textiles. STPIs concentrate on IT-ITeS growth and innovation, whereas SEZs aim to boost overall exports, attract foreign investment, and generate employment across multiple sectors.
IT sector provided direct employment to over 5.4 million people in 2022-23
The IT Software and Services industry is one of the largest employers in the organized sector. The total direct employment provided by this industry rose from 2.96 million in 2012-13 to 5.4 million in 2022-23. This includes a diverse range of professionals such as software developers, engineers, project managers, IT consultants, data analysts, cybersecurity experts, and more. In addition to direct employment, the industry also provides indirect employment to more than 12 million people, as of 2022. The number could be higher now.
Exports from STPIs quadrupled between 2010-11 and 2022-23
As of June 2024, there are 65 STPI units set up across the country, majority of which are in Tier II and Tier III cities. The government has also approved the setting up of another 20+ units. The overall exports by STPI registered IT/ITeS units increased from Rs. 20,051 crores in 2000-01 to Rs. 2,05,505 crores in 2009-10, marking a growth of almost nine times during the decade. The exports from STPI-registered units increased from Rs. 2,15,264 crores in 2010-11 to Rs. 8,48,398.2 crores in 2022-23, registering a growth by nearly four times in these 13 years. Between 2021-22 and 2022-23, the exports grew by Rs. 2,20,068 crores or 35%.
The bifurcation of the overall exports in 2021-22 shows that exports from units availing services under STP (under Foreign Trade (Development & Regulation) Act 1992) were Rs. 4,96,409.23 crores whereas exports from units availing only Softex attestation services was Rs. 1,31,920.42 crores. The same in 2022-23 was Rs.6,18,412.48 crores and Rs. 2,29,985.73 crores, respectively.
Six states account for nearly 95% of total software exports from STPIs in 2022-23
Six states- Karnataka, Haryana, Telangana, Tamil Nadu, Maharashtra, and Uttar Pradesh together accounted for nearly 95% of the total software exports from STPIs in India in 2021-22 and 2022-23. Except in 2020-21, the six states accounted for at least 94% of the exports since 2014-15. In 2020-21, Uttar Pradesh’s exports were worth only Rs. 165.95 crores.
Karnataka continues to maintain its reputation as an undisputed leader in the information technology ecosystem. The state alone accounts for more than 40% of the total exports from STPIs since 2016-17. Maharashtra stands second by contributing to roughly 20% of the total exports. This is followed by Telangana, which contributes about 14% each year. Between 2014-15 and 2022-23, exports from STPIs in Karnataka, Uttar Pradesh and Telangana tripled while Tamil Nadu and Haryana registered a slower growth compared to the rest.
Software exports from SEZs crossed seven lakh crores in 2022-23
A total of 270 SEZs were exporting as of 2022-23, according to the Department of Commerce’s annual report. Out of this, 163 (60%) are IT/ITeS, 25 Multi Product and 82 other sector-specific SEZs. Approximately, 5,620 units were set up in the SEZs as of 2022-23. As of March 2024, 280 SEZs were in operation, and 5,711 units were approved in these SEZs as of December 2023.
As already mentioned above, SEZs belong to multiple sectors. The total exports from all types of SEZs doubled from Rs. 4,63,770 crores in 2014-15 to Rs. 9,90,747 crores in 2021-22. According to an RTI response to Factly (Data is available on Dataful), the software exports from these SEZs grew 3.5 times from Rs. 2,12,019 crores in 2014-15 to Rs. 7,22,206 crores in 2022-23. The share of exports from IT SEZs out of the total exports from all SEZs rose from 45% in 2014-15 to 63% in 2020-21, before registering a marginal decline to 58% in 2021-22.
Karnataka, Tamil Nadu, and Maharashtra were the best performing states in the cumulative exports between 2014-15 and 2022-23
The same six states which accounted for 94% of the exports from STPIs also accounted for more than 90% of the software exports from SEZs. Throughout the period from 2014-15 to 2022-23, the states contributed 90 to 93% of the exports from SEZs. The state-wise data of exports from SEZs between 2014-15 and 2022-23 reveals that Karnataka, Tamil Nadu, and Maharashtra were the best-performing states in the cumulative exports during this period. From 2019-20, Maharashtra outperformed Tamil Nadu to emerge as the second-best performing state after Karnataka. Between 2020-21 and 2022-23, the exports of software products from SEZs in Karnataka and Telangana grew at a faster rate (nearly 60% growth) than the ones in Tamil Nadu (47%) and Maharashtra (37%).
Measures have been rolled out to boost software exports
In addition to the STPI Scheme and SEZs, the Government of India has set targets to achieve significant growth in the sector. For instance, under the Production Linked Incentive (PLI) Scheme for Large Scale Electronics Manufacturing (LSEM), the government has released Rs. 879.81 Cr as an incentive, and there are 32 beneficiaries under the Scheme. Additionally, the Next Generation Incubation Scheme (NGIS) has been approved to support the software product ecosystem, which is expected to contribute to the growth of IT exports. Other initiatives to promote IT sector export include Market Outreach Initiatives in the USA and UK, Market Development Initiative in Nordics and Africa Region, among others.
