Bangalore: India’s back-office exports could grow almost five-fold to $50 billion (Rs1.97 trillion) by 2012 provided stakeholders, including the government and the industry, build skill sets and improve infrastructure, according to a study by software lobby group Nasscom and strategy consulting firm Everest Group released on Tuesday.
The Indian business process outsourcing or BPO sector currently exports around $11 billion worth of services, and is growing at 35% a year. It employs more than 700,000 people and accounts for $4 out of every $10 worth of back-office services contracted out to offshore destinations in the world.
Growth potential: The BPO sector currently exports around $11 bn of services, and is growing at 35% a year. (Photo: Madhu Kapparath/ Mint)
The $50 billion target requires the sector to grow by 45-50% a year.
“The study not only estimates the opportunity ahead but also lays down specific agenda for all stakeholders to help achieve this,” said Som Mittal, president, Nasscom.
The study suggests eight measures to do this, including the extension of a tax holiday that is scheduled to end this year; creation of “BPO hubs” with enabling physical and social ecosystems; development of BPO-specific education modules to improve the talent availability and encouraging domestic BPO, among others.
Everest estimates the maximum addressable market size for Indian vendors at between $220 billion and $280 billion, of which less than 5% is currently tapped. The consulting firm also said that the domestic market provides an addressable market of $15-20 billion by 2012.
“A five-fold growth of the BPO industry will add 2.5% to India’s GDP (gross domestic product) by 2012 and create 2 million direct jobs,” said Gaurav Gupta, country head (India), Everest Group. At the current growth rate of 28-30%, the Indian BPO industry would touch $30 billion by 2012.
While back-office processes are expected to continue being a large part of services portfolio, the so-called middle-office and front-office services will account for about half of the future opportunities, Gupta said.
“The BPO industry could grow to what IT (information technology) industry is today,” said Raman Roy, chairman and managing director of Quattro BPO Solutions Pvt. Ltd.
Roy added that faster growth could create a shortage of talent at the entry level and middle level. He said the government would need to revamp the education system to cater to increasing demand.