Indian Government, Oil-rich nations, BRICs lift IT industry

Spending on IT is set to rise despite a US led economic slowdown, as oil-rich regions, such as Russia and the Middle East spend their petrodollars on large-scale IT projects.

The rising popularity of low-cost, ultra portable laptops in emerging markets in China, India and Latin America will also boost the global technology industry, which is facing signs of weakening corporate spending as the US sub-prime crisis hits company earnings.

Executives from top IT companies were bullish on their prospects saying growth was looking good even at a time of shaky consumer confidence, shaky company earnings and rising raw materials costs.

Some of the key growth drivers will be big emerging markets. The BRIC countries (Brazil, Russia, India and China) hold a lot of promise. IT spend by companies, consumers and governments may grow 6% to $1.43 trillion this year, compared with 7% growth a year earlier, with weakness in the US largely offset by growth in BRIC nations and other vibrant economies.

Although rocketing oil prices have dented earnings, they are also allowing oil exporters to spend more on technology. High oil prices are pushing up the economy in Russia and the Middle East, driving the ability of companies and the governments to keep increasing their IT spending.

Dell underlined the optimistic outlook last week when it posted a higher-than-expected quarterly profit, driven by cost cuts and strong demand from consumers and markets outside the US. Facing soaring fuel and food costs, and finding lenders less willing to hand over cash, consumers are turning to cheaper, smaller laptops, called Netbooks, or mobile internet devices.

The rising popularity of Netbooks is another area where technology companies can achieve growth. Asustek Computer expects sales of its handbag-sized Eee PC laptops to double to 10 million units next year, while Acer said smaller, cheaper laptops are seeing significant growth from emerging markets.

The notebook market is growing for the next 2-3 years, and with the entry of new mobile internet devices, the market can double in size, changing the profile of the industry.

Intel also sees potential in the market for low-cost computers. But analysts are wary about corporate tech spending. In the past, what happened to the economy in a year started affecting IT spending in the middle of the following year. There’s a possibility that sub-prime related impacts will appear a bit later. In addition to the above International scenario Indian Govt plans to subsidize internet for rural India.

Worried over missing the broadband addition target, the government is now planning to give subsidy for new broadband connection in the rural parts of the country. The subsidy would be up to 50% of the total cost of setting the system by service providers. Also, running cost of internet in rural areas would be about half of those in the cities. These steps are being taken in a move to strengthen the e-governance network as the government has miserably failed on this front.

The process of finalising the subsidy mechanism for rural broadband connections is in the last stage.

The scheme would be implemented in phased manner across the country and would also cover remote areas including the north-eastern states. The new scheme would cover common service centers (CSCs) being set up by the department of information technology (DIT) schools, primary health centers and village councils in a phased manner.
E-governance is one of the key areas of concern for the government. The government has not been able to achieve the desired level of efficiency in the project due to many reasons, including low penetration of internet in rural areas.

The national e-governance plan (NeGP) covers 27 mission mode projects and 8 support component to be implemented at the central, state and local government levels. The project includes setting up of one lakh CSCs in six lakh villages across the country.