Can Indian IT firms scale the Great Wall? It has been a long wait

Can Indian IT firms scale the Great Wall? It has been a long wait

Thursday May 31, 2018,

3 min Read

Earlier this week, Indian IT trade body Nasscom set up a Sino-Indian Digital Collaborative Opportunities Plaza, in China’s tech hub of Guiyang. Just like how it signed an agreement in Dalian late last year, the new initiative hopes to cut open the huge Chinese IT market, and the move is probably India’s most ambitious foray to-date.

As part of the launch, Indian IT players and Chinese clients signed agreements worth around $6 billion, mostly centred around big data. Indian IT companies have been trying to chip away at the Chinese market for years together, with little progress.

IT majors like Tata Consultancy Services (TCS), Infosys, and Wipro have had their presence in China, but they are yet to make a huge dent there. Language and cultural barriers have long been impediments, and government policies have not helped much either. As a result, revenues from China still languishes in low single digits.

India has been requesting China to provide better market access to Indian IT and pharmaceutical firms in a bid to minimise bilateral trade deficit, which stands now at over $50 billion. Collectively, Indian IT firms still employ only 25,000-30,000 employees in China, which shows how little we have penetrated the market.

The Trump administration in the US has been clamping down on Indian IT companies, making it difficult for them to secure H1-B slots. As a result, Indian firms have been setting up new delivery centres in the US and are hiring locals to reduce the dependency on visas. India has been reliant on the US for most of its IT revenues, contributing to over 60 percent of the income.

This is where China provides an alternative. India's exports to China last year increased 39.1 percent to $16.3 billion. But that is still only 4 percent of India’s total exports, with the European Union receiving about 20 percent of it.

The recent Modi-Xi meet-up was a good one for both countries, especially with the setting up of the Shanghai Co-operation Organisation (SCO). The $84.4 billion India-China bilateral trade last year is sure to get a nudge this year, with trade relations getting better. In the first quarter this year, bilateral trade was at $22 billion, up 15 percent on a year-on-year basis.

The Guiyang agreement deals largely with data analytics. The Guiyang Science and Technology Park will play host to an IT corridor, where rent-free offices will be provided. However, if Indian IT has to firmly take root in China, the local authorities will have to provide greater access. Networking with Chinese companies, especially the technology ones, has only got marginally easier.

If the Great Wall has to be scaled, Nasscom’s initiatives have to pick up greater pace. But patience will still be the key.