Digital India to push up govt spending on IT products

India will see a growth of over 5% while the world goes through decline of nearly 4%

GN Bureau | September 23, 2015



The government is set to increase its spending on information technology products and services by 5.2% to $6.88 billion this year as it steps up efforts to connect more people on Internet, says IT research firm Gartner.

This huge jump is due to the government’s initiatives to create a digitally-connected India through greater access to government services on mobile devices, wider reach of broadband network and creating more smart cities will drive its spending on information and communication technology.

The spending on services, which includes consulting, IT outsourcing and back-office related work, is likely to grow 10% to $1.6 billion, the data from Gartner showed. The agency expects investments in telecommunications services to grow 3% to $1.6 billion, driven by the rise in mobile network services. Mobile network services may account for half of the spending in telecommunications services, it said.

The government will be spending $18 billion on a massive campaign called Digital India that aims to more get people online faster and connect as many as 250,000 villages across the country using Internet by 2019.

The initiative is also aimed at providing electronic governance and universal phone connectivity across the country, and bridge the gap between those who have and don’t have access to Internet.

“Government spending on software will total $869 million USD in 2015, a 10.6 percent increase from 2014,” said Anurag Gupta, research vice president at Gartner. “The software market will be led by growth in vertical specific software (software applications that are unique to a vertical industry). These are stand-alone applications that are not modules or extensions of horizontal applications.”

Internal services will growth 8.8 percent in 2015 to reach $1.6 billion. Internal services refer to salaries and benefits paid to the information services staff of an organization. The information services staff includes all company employees that plan, develop, implement and maintain information systems.

“The investments in the ‘Digital India’ initiative, led by a focus to allow access of government services on mobile devices (part of the mobile government), expansion on broadband and planning for smart cities, will be a stimulus for Indian government’s ICT initiatives,“ said Gupta.

Fall in world spending
Worldwide IT spending across vertical industries is forecast to total $2.69 trillion in 2015, a 3.5 per cent decrease from 2014. Analysts said the rising US dollar is chiefly responsible for the slowdown.

"Appreciation of the US dollar (mainly against the euro, yen and the ruble), along with the relative slowdown of emerging markets (particularly Russia, Brazil and China), had a double impact on IT spending in 2015, and explains the downward revision in the forecast," said Gupta. "Unsurprisingly, most technology firms reporting revenue in US dollars have taken a negative hit on their quarterly revenue earnings."

Although all industries are expected to experience negative growth in 2015, given currency exchange rates, Gartner's projections for the top three growth industries are consistent with the previous quarter's forecast, with retail, banking and securities, and healthcare providers leading industry growth.

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