As the information-technology sector doubles in size over the next three years, it will trigger an explosive growth in consumer spending and buying, says a new survey, reinforcing recent studies on the growing impact of IT in the economy.
By 2010, the IT sector will employ more than 3.4 million people, with an average age of 27.5 years and earning Rs6 lakh annually. These trained professionals will account for one-sixth of all home loans in the next three years, 20% of domestic air travel, 13% of auto sales and 13.5% of income-tax collection, says a report by CLSA Asia-Pacific Markets, ‘Chain Reactions—Indian IT’s Impact on Economy, Consumption and GDP’.
As IT workers eat out more and buy second homes and take an average of 1.7 holidays in a year, they will create a ripple effect in the economy. CLSA estimates that for every new IT job created, there will be 1.4 new jobs in service sectors such as transport, real estate, hotels, financial services, training, support and facilities management.
The report comes at a time when the industry is making a concerted efforts to show that growth in the sector is going to help other sectors of the economy. Consumption spends by IT professionals and investment in capital assets and operating expenditure by the IT industry are seen as the three main drivers of the multiplier effect.
Every rupee spent on domestically sourced goods and services by technology sectors is translating into a total output of Rs2 in the economy, according to a study released earlier this month by industry body Nasscom and credit rating firm Crisil. Spin-off benefits are accruing to less educated workers, and cooks, drivers, carpenters, domestic help and security staff are hired in increasing numbers.
Much of the economic boom is triggered by the rise in discretionary spending by the upwardly mobile IT worker. On an average, a worker expect to see earnings rise six-fold in the coming decade. This confidence is leading to higher outlays on real estate and lifestyle purchases such as travel, automobiles, mobile phones and eating out.
CLSA estimates that annual spending by IT professionals on eating out alone is around Rs4,500 crore. A third of the tickets being bought in multiplexes are by these professionals who also change their handsets four times faster than the national average and spend three times more on mobile phone bills.
Meanwhile, IT workers are also big savers. While five out of 100 Indians have insurance, 80 out of every 100 IT employees are insured. They also invest close to 18% of their total saving in equities: it is 1.1% for the average Indian. They also accounted for a fifth of online stock-trading accounts opened in the past four years.
As the sector continues to chalk up a compounded annual growth of 25% over the next three years, it will absorb two-thirds of the 1,130sq. feet of new commercial real estate coming up and 75% of the residential space created.