FDI Inflows to Computer Software and Hardware

Foreign Direct Investment (FDI) Inflows to Computer Software and Hardware Industry in the first half of the fiscal year 2007-08 has been USD 0.3 billion. Software Technology Parks, regulatory reforms by the Indian government, the growing Indian market and availability of skilled workforce have been important factors in boosting FDI inflows to computer software and hardware in India.

An Overview of Computer Software and Hardware Industry in India -

Over the past few years the computer software industry has been one of the fastest growing sectors in Indian economy. FDI Inflows to Computer Software and Hardware Industry in India have been significant in the year 2007-08 with current figures being USD 0.3 billion for the first half of the fiscal year.

The computer software industry has witnessed a growth of 28 percent CAGR in the past five years. The total contribution of Information Technology and ITES is estimated to grow by 7 percent by the year 2007-08 as against 4.8 percent in the year 2005-06 to the Gross Domestic Product of India. The computer hardware industry has occupied about USD 1.4 billion in the entire electronics hardware industry as has been accounted in the Financial Year 2005. This includes PC, Servers, and Laptops. 100 percent Foreign Direct Investment is permitted under automatic route in the computer hardware industry.

FDI Inflows to Computer Software Industry

100 percent FDI is permitted under automatic route to the E-Commerce activities in India. However, a pertinent condition is that, 26 percent of their equity will be spent on welfare activities for the Indian population in five years. Software Technology Parks (STP) have been a major initiative in India to drive in Foreign Direct Investment in the computer software industry. These Software Technology Parks provide highly developed infrastructure and facilities that attract foreign investors. Regulatory measures by the Indian government have also played a positive role in this regard. Measures like increased freedom of recruiting and laying-off employees, tax benefits and easing of export producers have contributed to the growth of FDI in this sector.

FDI Inflows to Computer Hardware Industry

India constitutes 0.6 percent of the entire international market in terms of manufacturing electronics hardware. Electronics hardware in India is an USD 11 billion industry. The computer hardware industry in India has occupied about USD 1.4 billion in the entire electronics hardware industry as has been accounted in the Financial Year 2005. This includes PC, Servers, and Laptops. 100 percent FDI is permitted under automatic route in the computer hardware industry in India. The huge market for computer hardware in India, coupled with the availability of skilled workforce in this sector has boosted the inflow of FDI. High growth prospects, in terms of increased consumption in the India as well as increasing demand for exports are expected to lead to more Foreign Direct Investments in this sector.

Last Updated on 4/23/2011