India aims to be software product nation, official says

India, the world’s fastest-growing major economy, is looking to transition from a global information technology (IT) service provider to an IT product superpower, while leveraging technology to boost economic growth and global recognition.

“Becoming a product nation is an ambition that India has,” S Krishnan, Secretary at the Ministry of Electronics & Information Technology, said at the 33rd Foundation Day celebrations of Software Technology Parks of India (STPI). The STPI is an autonomous body set up to promote India’s IT and IT-enabled services (ITES) industry.

“India’s global recognition is no longer limited to “IT services” but the country is emerging as a strong player in software product innovation,” Krishnan said in a report released during the Foundation Day celebrations.

“As we chart our journey toward becoming a formidable player in software products, it is imperative to harness cutting-edge technologies and explore sectors where India can leverage its existing strengths to propel growth. Indian software products nowadays cater to niche industry demands and the focus is now on design and creation of IP (intellectual property),” Krishnan said in the report.

Krishnan said India’s IT and ITES sector is a $250 billion industry that employs close to five million youth with potential for further employment.

“As the digital economy grows, as emerging technologies get adopted, as we adopt technologies like artificial intelligence (AI), Internet of Things (IoT), blockchain, and a whole host of others, the opportunities that exist for youth are tremendous. High quality jobs, higher value-added jobs, which will take India to the next level of development, are in this sector. This continues to be a sunrise sector,” he pointed out.

Krishnan’s statements come as Prime Minister Narendra Modi, who won a rare third consecutive term during national elections this year, is reportedly positioning India as an alternative for global tech companies looking to reduce dependence on China for their supply chains.

India’s strong economic growth, expected at over 7% in the current fiscal, has successfully lured suppliers for major U.S. corporations like Apple (NASDAQ: AAPL) and Google (NASDAQ: GOOGL). Google has reportedly asked local suppliers to begin production of its Pixel smartphones in India. At the same time, about 25% of all iPhones is expected to be made in India by 2028 from only 5% to 7% of Apple’s manufacturing in January 2023.

India plans to increase its share of global manufacturing to 5% by 2030 and 10% by 2047, according to an internal document seen by Reuters. Currently, less than 3% of global manufacturing takes place in India, compared to 24% in China.

“India needs to own a lot of intellectual property because ultimately that is where all the benefits and most of the profits go to,” Krishnan said.

According to Arvind Kumar, Director General of Software Technology Parks of India, the Indian software product market, currently valued at about $14.2 billion, encompasses over 4,500 companies and is buoyed by the widespread embrace of cloud-based solutions.

“Key sectors such as industrial, automotive, healthcare, agriculture, and BFSI [Banking, Financial Services and Insurance] are expected to drive over 60% of the AI-driven value in gross domestic product (GDP) by FY26, further underlining the immense potential of the software product industry. It is estimated that AI adoption alone will add $500 billion to India’s GDP by 2025,” Kumar said in the report.

However, diverse domestic regulations are a challenge that results in companies shifting to foreign markets, driving talent away from India. The lack of capital availability is a major hurdle to the domestic industry’s growth and success, while digital illiteracy and unawareness about software products among users continue to be a major concern for the software product industry in India, the report stated.

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