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March 04, 2007

The IT industry's impact on the Indian economy

Based on an online survey of over 42,000 IT professionals, CLSA has come out with an interesting report, - titled "Chain Reactions" - about the impact of the growth of the IT industry on the Indian economy.

Where IT makes an impact

! From FY08CL, India’s IT exports are set to exceed its net oil imports.

! The IT sector will pick up over 80% of India’s employable engineers and 60% IT-employable graduates –addressing one-third of the urban employment challenge.

! We estimate that each IT job will create at least 1.4 other jobs in the economy.

! We forecast IT to account for 20-25% of Indian GDP expansion over FY07-10; transform Indian cities; and, as the sector matures, drive innovation in the country.

Spending trends among IT professionals

! IT alone can absorb 70-75% of residential and two-thirds of forecast commercial
FY07-10 real estate demand. Realty demand forecasts seem conservative.

! We see the segment supporting two-thirds of five-star hotel-room additions and one-third of budget hotel expansion over FY07-10.

! We predict IT professionals will personally fund 20% of incremental domestic travel.

! An important contributor to financial services development, IT workers account 20% of online trading accounts, and 12% of credit cards.

! IT workers will also drive 17% of new home loans over FY07-10CL.

! They will also account for 13% of car sales; 16% of A+B-segment car sales; and one-third of demand for multiplexes over FY07-10CL.

As they age, as they earn

! We see further spikes in consumption trends for the 28-35 age bracket –particularly home/car ownership, and healthcare and leisure spending.

! IT professionals spend US$1bn annually on “eating out” and nearly US$700m annual healthcare costs.

! All these areas will get a boost in coming years – we estimate 500,000 IT professionals will move into this age group in the next three to four years.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.