BSE SENSEX, also called the BSE 30 or simply the SENSEX, is a free-float market

capitalization-weighted stock market index of 30 well-established and financially sound

companies listed on Bombay Stock Exchange. The 30 component companies which are

some of the largest and most actively traded stocks are representative of various

industrial sectors of the Indian economy. Published since January 1, 1986, the SENSEX

is regarded as the pulse of the domestic stock markets in India. The base value of the

SENSEX is taken as 100 on April 1, 1979, and its base year as 1978-79. On 25 July, 2001

BSE launched DOLLEX-30, a dollar-linked version of SENSEX. As of 21 April 2011,

the market capitalization of SENSEX was about  29,733 billion (US$593 billion)

(42.34% of market capitalization of BSE), while its free-float market capitalization was  

15,690 billion (US$313 billion).

The Bombay Stock Exchange (BSE) regularly reviews and modifies its composition to be

sure it reflects current market conditions. The index is calculated based on a free float

capitalization method—a variation of the market capitalization method. Instead of using a

company's outstanding shares it uses its float, or shares that are readily available for

trading. The free-float method, therefore, does not include restricted stocks, such as those

held by promoters, government and strategic investors.

Initially, the index was calculated based on the ‘full market capitalization’ method.

However this was shifted to the free float method with effect from September 1, 2003.

Globally, the free float market capitalization is regarded as the industry best practice.

As per free float capitalization methodology, the level of index at any point of time

reflects the free float market value of 30 component stocks relative to a base period. The

market capitalization of a company is determined by multiplying the price of its stock by

the number of shares issued by the company. This market capitalization is multiplied by a

free float factor to determine the free float market capitalization. Free float factor is also

referred as adjustment factor. Free float factor represents the percentage of shares that are

readily available for trading.

The calculation of SENSEX involves dividing the free float market capitalization of 30

companies in the index by a number called index divisor. The divisor is the only link to

original base period value of the SENSEX. It keeps the index comparable over time and

is the adjustment point for all index adjustments arising out of corporate actions,

replacement of scraps, etc.

The index has increased by over ten times from June 1990 to the present. Using

information from April 1979 onwards, the long-run rate of return on the BSE SENSEX

works out to be 18.6% per annum, which translates to roughly 9% per annum after

compensating for inflation.

The BSE Sensex currently consists of the following 30 major Indian companies as of

17 February 2012

Sl.no Company Industry Scrip

1 Housing Development Finance Corporation Consumer finance 500010

2 Cipla Pharmaceuticals 500087

3 Bharat Heavy Electricals Electrical equipments 500103

4 State Bank Of India Banking 500112

5 HDFC Bank Banking 500180

6 Hero Motocorp Automotive 500182

7 Infosys Information Technology 500209

8 Oil and Natural Gas Corporation Oil and gas 500312

9 Reliance Industries Oil and gas 500325

10 Tata Power Power 500400

11 Hindalco Industries Metals and Mining 500440

12 Tata Steel Steel 500470

13 Larsen & Toubro Conglomerate 500510

14 Mahindra & Mahindra Automotive 500520

15 Tata Motors Automotive 500570

16 Hindustan Unilever Consumer goods 500696

17 ITC Conglomerate 500875

18 Sterlite Industries Metals and Mining 500900

19 Wipro Information Technology 507685

20 Sun Pharmaceutical Pharmaceuticals 524715

21 GAIL Oil and gas 532155

22 ICICI Bank Banking 532174

23 Jindal Steel & Power Steel and power 532286

24 Bharti Airtel Telecommunication 532454

25 Maruti Suzuki Automotive 532500

26 Tata Consultancy Services Information Technology 532540

27 NTPC Power 532555

28 DLF Real estate 532868

29 Bajaj Auto Automotive 532977

30 Coal India Metals and Mining 533278

Source:

SOME OF THE HISTORICAL REPLACEMENTS WERE:

DLF replaced Dr. Reddy's Lab on November 19, 2007.

Jaiprakash Associates Ltd replaced Bajaj Auto Ltd on March 14, 2008.

Sterlite Industries replaced Ambuja Cements on July 28, 2008.

Tata Power Company replaced Cipla Ltd. on July 28, 2008.

Sun Pharmaceutical Industries replaced Satyam Computer Services on January 8,

2009

Hero Honda Motors Ltd. replaced Ranbaxy on June 29, 2009

Cipla to replace Sun Pharma from May 3, 2010

Grasim replaced JSPL in 2010

Bajaj Auto replaced ACC from Dec 6th, 2010

Coal India replaced Reliance Infrastructure and Sun Pharmaceutical replaced

Reliance Communications from Aug 8th, 2011.

Milestones of Sensex

Here is a timeline on the rise of the SENSEX through Indian stock market history.

1000, July 25, 1990 - On July 25, 1990, the SENSEX touched the four-digit

figure for the first time and closed at 1,001 in the wake of a good monsoon and

excellent corporate results.

2000, January 15, 1992 - On January 15, 1992, the SENSEX crossed the 2,000-

mark and closed at 2,020 followed by the liberal economic policy initiatives

undertaken by the then finance minister and current Prime Minister Dr

Manmohan Singh.

3000, February 29, 1992 - On February 29, 1992, the SENSEX surged past the

3000 mark in the wake of the market-friendly Budget announced by Manmohan

Singh.

4000, March 30, 1992 - On March 30, 1992, the SENSEX crossed the 4,000-

mark and closed at 4,091 on the expectations of a liberal export-import policy. It

was then that the Harshad Mehta scam hit the markets and SENSEX witnessed

unabated selling.

5000, October 11, 1999 - On October 8, 1999, the SENSEX crossed the 5,000-

mark as the Bharatiya Janata Party-led coalition won the majority in the 13th Lok

Sabha election.

6000, February 11, 2000 - On February 11, 2000, the information technology

boom helped the SENSEX to cross the 6,000-mark and hit and all time high of

6,006.

7000, June 21, 2005 - On June 20, 2005, the news of the settlement between the

Ambani brothers boosted investor sentiments and the scrips of RIL, Reliance

Energy, Reliance Capital and IPCL made huge gains. This helped the SENSEX

crossed 7,000 points for the first time.

8000, September 8, 2005 - On September 8, 2005, the Bombay Stock Exchange's

benchmark 30-share index – the SENSEX - crossed the 8000 level following brisk

buying by foreign and domestic funds in early trading.

9000, December 9, 2005 - The SENSEX on November 28, 2005 crossed 9000 to

touch 9000.32 points during mid-session at the Bombay Stock Exchange on the

back of frantic buying spree by foreign institutional investors and well supported

by local operators as well as retail investors.

10,000, February 7, 2006 - The SENSEX on February 6, 2006 touched 10,003

points during mid-session. The SENSEX finally closed above the 10,000-mark on

February 7, 2006.

11,000, March 27, 2006 - The SENSEX on March 21, 2006 crossed 11,000 and

touched a peak of 11,001 points during mid-session at the Bombay Stock

Exchange for the first time. However, it was on March 27, 2006 that the SENSEX

first closed at over 11,000 points.

12,000, April 20, 2006 - The SENSEX on April 20, 2006 crossed 12,000 and

touched a peak of 12,004 points during mid-session at the Bombay Stock

Exchange for the first time.

13,000, October 30, 2006 - The SENSEX on October 30, 2006 crossed 13,000

for the first time. It touched a peak of 13,039.36 and finally closed at 13,024.26.

14000, December 5, 2006 - The SENSEX on December 5, 2006 crossed 14,000.

15,000, July 6, 2007 - The SENSEX on July 6, 2007 crossed 15,000 marks.

16,000, September 19, 2007 - The SENSEX on September 19, 2007 crossed the

16,000 mark.

17,000, September 26, 2007 - The SENSEX on September 26, 2007 crossed the

17,000 mark for the first time.

18,000, October 9, 2007 - The SENSEX on October 9, 2007 crossed the 18,000

mark for the first time.

19,000, October 15, 2007 - The SENSEX on October 15, 2007 crossed the

19,000 mark for the first time.

20,000, October 29, 2007 - The SENSEX on October 29, 2007 crossed the

20,000 mark for the first time.

21,000, Jan 08, 2008 - The SENSEX on January 8, 2008 touched all time peak of

21078 before closing at 20873.

November 5, 2010 - The SENSEX on November 5, 2010 closes at 20,893.6 with

highest peak in two years.

Graph of SENSEX from July 1997 to March 2011.

SENSEX_graph.png (793 × 333 pixels, file size: 24 KB, MIME type: image/png)

May 2006

On May 22, 2006, the SENSEX plunged by 1100 points during intra-day trading, leading

to the suspension of trading for the first time since May 17, 2004. The volatility of the

SENSEX had caused investors to lose Rs 6 lakh crore (US$131 billion) within seven

trading sessions. The Finance Minister of India, P. Chidambaram, made an unscheduled

press statement when trading was suspended to assure investors that nothing was wrong

with the fundamentals of the economy, and advised retail investors to stay invested.

When trading resumed after the reassurances of the Reserve Bank of India and the

Securities and Exchange Board of India (SEBI), the SENSEX managed to move up 700

points, still 450 points in the red.

The SENSEX eventually recovered from the volatility, and on October 16, 2006, the

SENSEX closed at an all-time high of 12,928.18 with an intra-day high of 12,953.76.

This was a result of increased confidence in the economy and reports that India's

manufacturing sector grew by 11.1% in August 2006.

13,000, October 30, 2006 - The SENSEX on October 30, 2006 crossed 13,000

and still riding high at the Bombay Stock Exchange for the first time. It took 135

days to reach 13,000 from 12,000. And 124 days to reach 13,000 from 12,500. On

October 30, 2006 it touched a peak of 13,039.36 & closed at 13,024.26.

14,000, December 5, 2006 - The SENSEX on December 5, 2006 crossed 14,000

and touched a peak of 14028 at 9.58AM(IST) while opening for the day

December 5, 2006.

15,000, July 6, 2007- The SENSEX on July 6, 2007 crossed another milestone

and reached a magic figure of 15,000. it took almost 7 month and 1 day to touch

such a historic miles

May 2009

On May 18, 2009, the SENSEX surged 2110.79 points from the previous closing of

12174.42 this leading to the suspension of trade for the whole day.This event created

history in Dalal Street, by being the first ever time that trade had been suspended for an

increase in value. This rally is primarily due to the victory of the UPA in the 15th General

elections. Trading was open for that day only for 55 seconds. Initially 25 seconds and 30

seconds market reached upper freeze limit twice in that day itself.

Effects of the Sub prime crisis in the U.S

On Monday July 23, 2007, the SENSEX touched a new height of 15,733 points. On July

27, 2007 the SENSEX witnessed a huge correction because of selling by Foreign

Institutional Investors (FIIs) and global cues to come back to 15,160 points by noon.

Following global cues and heavy selling in the international markets, the BSE SENSEX

fell by 615 points in a single day on Wednesday August 1, 2007.

16,000, September 19, 2007- The SENSEX (Sensitivity Index) on September 19,

2007 crossed the 16,000 mark and reached a historic peak of 16322 while closing.

The bull hits because of the rate cut of 50 bit/s in the discount rate by the Fed

chief Ben Bernanke on September 26, 2007 crossed the 17,000 mark for the first

time, creating a record for the second fastest 1000 point gain in just 5 trading

sessions. It failed however to sustain the momentum and closed below 17000. The

SENSEX closed above 17000 for the first time on the following day. Reliance

group has been the main contributor in this bull run, contributing 256 points. This

also helped Mukesh Ambani's net worth to grow to over $50 billion or Rs.2

trillion. It was also during this record bull run that the SENSEX for the first time

zoomed ahead of the Nikkei of Japan.

18,000, October 9, 2007- The SENSEX crossed the 18k mark for the first time on

October 9, 2007. The journey from 17k to 18k took just 8 trading sessions which

is the third fastest 1000 point rise in the history of the SENSEX. The SENSEX

closed at 18,280 at the end of day. This 788 point gain on October 9 was the

second biggest single day absolute gains.

19,000, October 15, 2007- The SENSEX crossed the 19k mark for the first time

on October 15, 2007. It took just 4 days to reach from 18k to 19k. This is the

fastest 1000 points rally ever and also the 640 point rally was the second highest

single day rally in absolute terms. This made it a record 3000 point rally in 17

trading sessions overall.

Therefore the US Subprime crisis has a great effect even on INDIA.gold cross the

psychological barrier.

Participatory notes issue

On October 16, 2007, SEBI (Securities & Exchange Board of India) proposed curbs on

participatory notes which accounted for roughly 50% of FII investment in 2007. SEBI

was not happy with P-notes because it was not possible to know who owned the

underlying securities, and hedge funds acting through P-notes might therefore cause

volatility in the Indian markets.

However the proposals of SEBI were not clear and this led to a knee-jerk crash when the

markets opened on the following day (October 17, 2007). Within a minute of opening

trade, the SENSEX crashed by 1744 points or about 9% of its value - the biggest intra-

day fall in Indian stock markets in absolute terms till then. This led to automatic

suspension of trade for 1 hour. Finance Minister P. Chidambaram issued clarifications, in

the meantime, that the government was not against FIIs and was not immediately banning

PNs. After the market opened at 10:55 AM, the index staged a comeback and ended the

day at 18715.82, down 336.04 from the last day's close.

This was, however not the end of the volatility. The next day (October 18, 2007), the

SENSEX tumbled by 717.43 points — 3.83 per cent — to 17998.39. The slide continued

the next day when the SENSEX fell 438.41 points to settle at 17559.98 at the end of the

week, after touching the lowest level of that week at 17226.18 during the day.

After detailed clarifications from the SEBI chief M. Damodaran regarding the new rules,

the market made a 879-point gain on October 23, thus signalling the end of the PN crisis.

20,000, October 29, 2007- The SENSEX crossed the 20k mark for the first time

with a massive 734.5 point gain but closed below the 20k mark. It took 11 days to

reach from 19k to 20k. The journey of the last 10,000 points was covered in just

869 sessions as against 7,297 sessions taken to touch the 10,000 mark from 1,000

levels. In 2007 alone, there were six 1,000-point rallies for the SENSEX.

January 2008

In the third week of January 2008, the SENSEX experienced huge falls along with other

markets around the world. On January 21, 2008, the SENSEX saw its highest ever loss of

1,408 points at the end of the session. The SENSEX recovered to close at 17,605.40 after

it tumbled to the day's low of 16,963.96, on high volatility as investors panicked

following weak global cues amid fears of a recession in the US.

The next day, the BSE SENSEX index went into a free fall. The index hit the lower

circuit breaker in barely a minute after the markets opened at 10 AM. Trading was

suspended for an hour. On reopening at 10.55 AM IST, the market saw its biggest intra-

day fall when it hit a low of 15,332, down 2,273 points. However, after reassurance from

the Finance Minister of India, the market bounced back to close at 16,730 with a loss of

875 points.

Over the course of two days, the BSE SENSEX in India dropped from 19,013 on Monday

morning to 16,730 by Tuesday evening or a two day fall of 13.9%.

9,975, October 17, 2008 - SENSEX crashes below the psychological 5 figure

mark of 10K, following extremely negative global financial indications in US and

other countries. Exactly one year back in October 2007, SENSEX had gone past

the 20K mark.

8701.07, October 24, 2008 lost 10.96% of its value on the intra day trade, the

3rd highest loss for a one day period in its history

Major crashes since 2000

May 2006

On May 22, 2006, the SENSEX plunged by 1100 points during intra-day trading, leading

to the suspension of trading for the first time since May 17, 2004. The volatility of the

SENSEX had caused investors to lose Indian rupees 6 lakh crore ($131 billion) within

seven trading sessions. The Finance Minister of India, P. Chidambaram, made an

unscheduled press statement when trading was suspended to assure investors that nothing

was wrong with the fundamentals of the economy, and advised retail investors to stay

invested. When trading resumed after the reassurances of the Reserve Bank of India and

the Securities and Exchange Board of India (SEBI), the SENSEX managed to move up

700 points, still 450 points in the red.

The SENSEX eventually recovered from the volatility, and on October 16, 2006, the

SENSEX closed at an all-time high of 12,928.18 with an intra-day high of 12,953.76.

This was a result of increased confidence in the economy and reports that India's

manufacturing sector grew by 11.1% in August 2006.

Effects of the subprime crisis in the U.S.

On July 23, 2007, the SENSEX touched a new high of 15,733 points. On July 27, 2007

the SENSEX witnessed a huge correction because of selling by Foreign Institutional

Investors and global cues to come back to 15,160 points by noon. Following global cues

and heavy selling in the international markets, the BSE SENSEX fell by 615 points in a

single day on August 1, 2007.

Participatory notes issue

On October 16, 2007, SEBI (Securities & Exchange Board of India) proposed curbs on

participatory notes which accounted for roughly 50% of FII investment in 2007. SEBI

was not happy with P-notes because it was not possible to know who owned the

underlying securities, and hedge funds acting through P-notes might therefore cause

volatility in the Indian markets.

However the proposals of SEBI were not clear and this led to a knee-jerk crash when the

markets opened on the following day (October 17, 2007). Within a minute of opening

trade, the SENSEX crashed by 1744 points or about 9% of its value - the biggest intra-

day fall in Indian stock markets in absolute terms till then. This led to automatic

suspension of trade for 1 hour. Finance Minister P. Chidambaram issued clarifications, in

the meantime, that the government was not against FIIs and was not immediately banning

PNs. After the market opened at 10:55 AM, the index staged a comeback and ended the

day at 18715.82, down 336.04 from the last day's close.

This was, however not the end of the volatility. The next day (October 18, 2007), the

SENSEX tumbled by 717.43 points — 3.83 per cent — to 17998.39. The slide continued

the next day when the SENSEX fell 438.41 points to settle at 17559.98 at the end of the

week, after touching the lowest level of that week at 17226.18 during the day.

After detailed clarifications from the SEBI chief M. Damodaran regarding the new rules,

the market made a 879-point gain on October 23, thus signalling the end of the PN crisis.

January 2008

In the third week of January 2008, the SENSEX experienced huge falls along with other

markets around the world. On January 21, 2008, the SENSEX saw its highest ever loss of

1,408 points at the end of the session. The SENSEX recovered to close at 17,605.40 after

it tumbled to the day's low of 16,963.96, on high volatility as investors panicked

following weak global cues amid fears of a recession in the US.

The next day, the BSE SENSEX index went into a free fall. The index hit the lower

circuit breaker in barely a minute after the markets opened at 10 AM. Trading was

suspended for an hour. On reopening at 10.55 AM IST, the market saw its biggest intra-

day fall when it hit a low of 15,332, down 2,273 points. However, after reassurance from

the Finance Minister of India, the market bounced back to close at 16,730 with a loss of

875 points.

Over the course of two days, the BSE SENSEX in India dropped from 19,013 on Monday

morning to 16,730 by Tuesday evening or a two day fall of 13.9%.

SENSEX falls

Some major single-day falls of the SENSEX have occurred on the following dates:

1. January 21, 2008 --- 1,408.35 points

2. Oct 24, 2008---1070.63 points

3. March 17, 2008 --- 951.03 points

4. July 6, 2009 --- 870 points

5. January 22, 2008 --- 857 points

6. February 11, 2008 --- 833.98 points

7. May 18, 2006 --- 826 points

8. October 10, 2008 --- 800.10 points

9. March 13, 2008 --- 770.63 points

10. December 17, 2007 --- 769.48 points

11. January 7, 2009 --- 749.05 points

12. March 31, 2007 --- 726.85 points

13. October 6, 2008 --- 724.62 points

14. October 17, 2007 --- 717.43 points

15. September 15, 2008 --- 710.00 points

16. September 22, 2011 --- 704.00 points

17. January 18, 2007 --- 687.82 points

18. November 21, 2007 --- 678.18 points

19. August 16, 2007 --- 642.70 points

20. August 17, 2009 --- 626.71 points

21. June 27, 2008 --- 600.00 points

22. February 24, 2011 --- 545.92 points

23. February 27, 2012 --- 477.82 points

24. November 16, 2010 --- 444.55 Points

25. February 4, 2011 --- 441.92 Points

26. November 12, 2010 --- 432 Points

TABLE SHOWING ANNUAL AVERAGES OF SHARE PRICE INDICES AND MARKET CAPITALISATION (Amount in Rupees crore)

Year BSE Sensex BSE National RBI Index Market capitalization

(Base : 1978-79 =100) (Base : 1983-84 = 100) (Base : 1980-81 = 100) BSE All-India

1 2 3 4 5 61979-80 122.32 - - 5421 6750

1980-81 138.87 - 100.00 - -

1981-82 207.91 - 118.90 - -

1982-83 221.51 - 110.40 9769 11635

1983-84 238.33 100.00 125.30 10219 13381

1984-85 266.19 116.01 136.00 20378 24302

1985-86 492.23 216.99 221.70 21636 27572

1986-87 567.39 256.85 230.60 25937 35521

1987-88 454.46 232.23 207.30 45519 51379

1988-89 613.66 307.84 247.50 54560 -

1989-90 729.49 384.84 359.40 65206 70521

1990-91 1049.53 536.99 500.30 90836 110279

1991-92 1879.51 916.63 776.20 323363 354106

1992-93 2895.67 1321.04 1142.10 188146 228780

1993-94 2898.69 1373.00 1051.30 368071 400077

1994-95 3974.91 1899.53 1537.30 435481 473349

1995-96 3288.68 1525.93 1189.60 526476 572257

1996-97 3469.24 1554.64 1146.80 463915 488332

1997-98 3812.86 1650.07 1060.10 560325 589816

1998-99 3294.78 1457.07 976.40 545361 574064

1999-00 4658.63 2278.16 - 912842 -

2000-01 4269.69 2170.51 - 571553 -

2001-02 3331.95 1587.70 - 612224 -

2002-03 3206.29 1597.82 - 572198 -

2003-04 4492.19 2315.70 - 1201207 -

2004-05 5740.52 3077.68 - 1698428 -

2005-06 8278.55 4380.71 - 3022191 -

2006-07 12277.33 6242.73 - 3545041 -

2007-08 14420.53 7398.24 - 4538005 -

Note : 1. Market capitalisation data are as at end-December up to 1987-88 and at end-March from 1988-89 onwards. 2. Compilation of RBI index was discontinued by the Reserve Bank of India since 1999-2000. Similarly, the compilation of data on the All-India market capitalisation was discontinued by Bombay Stock Exchange Limited (BSE), since 1999-2000.

Source : 1. Bombay Stock Exchange Limited (BSE). 2. Reserve Bank of India.

INFORMATION TECHNOLOGY SECTOR

The Information technology industry in India has gained a brand identity as a

knowledge economy due to its IT and ITES sector. The IT–ITES industry has two major

components: IT Services and business process outsourcing (BPO). The growth in the

service sector in India has been led by the IT–ITES sector, contributing substantially to

increase in GDP, employment, and exports. The sector has increased its contribution to

India's GDP from 1.2% in FY1998 to 7.1% in FY2011. According to NASSCOM, the

IT–BPO sector in India aggregated revenues of US$88.1 billion in FY2011, where export

and domestic revenue stood at US$59 billion and US$29 billion respectively. The top

seven cities that account for about 90% of this sectors exports are Bangalore, Chennai,

Hyderabad, Mumbai, Pune, Delhi, Kolkata, Coimbatore and Kochi. Export dominate the

IT–ITES industry, and constitute about 77% of the total industry revenue. Though the

IT–ITES sector is export driven, the domestic market is also significant with a robust

revenue growth.[1] The industry’s share of total Indian exports (merchandise plus

services) increased from less than 4% in FY1998 to about 25% in FY2012. The "Big

Three" Indian IT Services firm are Tata Consultancy Services, Infosys and Wipro.

This sector has also led to employment generation. Direct employment in the IT services

and BPO/ITES segment was 2.3 million in 2009-10 and is estimated to reach nearly 2.5

million by the end of financial year 2010-11. Indirect employment of over 8.3 million job

opportunities is also expected to be generated due to the growth of this sector in 2010-11.

Generally dominant player in the global outsourcing sector. However, the sector

continues to face challenges of competitiveness in the globalized world, particularly from

countries like China and Philippines.

India's growing stature in the Information Age enabled it to form close ties with both the

United States of America and the European Union. However, the recent global financial

crises has deeply impacted the Indian IT companies as well as global companies. As a

result hiring has dropped sharply, and employees are looking at different sectors like the

financial service, telecommunications, and manufacturing industries, which have been

growing phenomenally over the last few years. India's IT Services industry was born in

Mumbai in 1967 with the establishment of Tata Group in partnership with Burroughs.

The first software export zone SEEPZ was set up here way back in 1973, the old avatar of

the modern day IT park. More than 80 percent of the country's software exports happened

out of SEEPZ, Mumbai in 80s.

HISTORY

The Indian Government acquired the EVS EM computers from the Soviet Union, which

were used in large companies and research laboratories. In 1968 Tata Consultancy

Services—established in SEEPZ, Mumbai[4] by the Tata Group—were the country's

largest software producers during the 1960s. As an outcome of the various policies of

Jawaharlal Nehru (office: 15 August 1947 – 27 May 1964) the economically beleaguered

country was able to build a large scientific workforce, third in numbers only to that of the

United States of America and the Soviet Union. On 18 August 1951 the minister of

education Maulana Abul Kalam Azad, inaugurated the Indian Institute of Technology at

Kharagpur in West Bengal. Possibly modeled after the Massachusetts Institute of

Technology these institutions were conceived by a 22 member committee of scholars and

entrepreneurs under the chairmanship of N. R. Sarkar.

Relaxed immigration laws in the United States of America (1965) attracted a number of

skilled Indian professionals aiming for research. By 1960 as many as 10,000 Indians were

estimated to have settled in the US. By the 1980s a number of engineers from India were

seeking employment in other countries. In response, the Indian companies realigned

wages to retain their experienced staff. In the Encyclopedia of India, Kamdar (2006)

reports on the role of Indian immigrants (1980 - early 1990s) in promoting technology-

driven growth:

The National Informatics Centre was established in March 1975. The inception of The

Computer Maintenance Company (CMC) followed in October 1976. During 1977-1980

the country's Information Technology companies Tata Infotech, Patni Computer Systems

and Wipro had become visible. The 'microchip revolution' of the 1980s had convinced

both Indira Gandhi and her successor Rajiv Gandhi that electronics and

telecommunications were vital to India's growth and development. MTNL underwent

technological improvements. During 1986-1987, the Indian government embarked upon

the creation of three wide-area computer networking schemes: INDONET (intended to

serve the IBM mainframes in India), NICNET (the network for India's National

Informatics Centre), and the academic research oriented Education and Research

Network (ERNET).

POST LIBERALIZATION

Videsh Sanchar Nigam Limited (VSNL) introduced Gateway Electronic Mail Service in

1991, the 64 kbit/s leased line service in 1992, and commercial Internet access on a

visible scale in 1992. Election results were displayed via National Informatics Centre's

NICNET.

The Indian economy underwent economic reforms in 1991, leading to a new era of

globalization and international economic integration. Economic growth of over 6%

annually was seen during 1993-2002. The economic reforms were driven in part by

significant the internet usage in the country. The new administration under Atal Bihari

Vajpayee—which placed the development of Information Technology among its top five

priorities— formed the Indian National Task Force on Information Technology and

Software Development.

The New Telecommunications Policy, 1999 (NTP 1999) helped further liberalize

India's telecommunications sector. The Information Technology Act 2000 created legal

procedures for electronic transactions and e-commerce.

Throughout the 1990s, another wave of Indian professionals entered the United States.

The number of Indian Americans reached 1.7 million by 2000. This immigration

consisted largely of highly educated technologically proficient workers. Within the

United States, Indians fared well in science, engineering, and management. Graduates

from the Indian Institutes of Technology (IIT) became known for their technical skills.

The success of Information Technology in India not only had economic repercussions but

also had far-reaching political consequences. India's reputation both as a source and a

destination for skilled workforce helped it improve its relations with a number of world

economies. The relationship between economy and technology—valued in the western

world—facilitated the growth of an entrepreneurial class of immigrant Indians, which

further helped aid in promoting technology-driven growth.

RECENT DEVELOPMENT

The economic effect of the technologically inclined services sector in India—accounting

for 40% of the country's GDP and 30% of export earnings as of 2006, while employing

only 25% of its workforce—is summarized by Sharma (2006):

Today, Bangalore is known as the Silicon Valley of India and contributes 33% of Indian

IT Exports. India's second and third largest software companies are head-quartered in

Bangalore, as are many of the global SEI-CMM Level 5 Companies.

Mumbai too has its share of IT companies that are India's first and largest, like TCS and

well established like Reliance, Patni, LnT Infotech, i-Flex, WNS, Shine, Naukri, Jobspert

etc. are head-quartered in Mumbai. And these IT and dot com companies are ruling the

roost of Mumbai's relatively high octane industry of Information Technology.

Such is the growth in investment and outsourcing, it was revealed that Cap Gemini will

soon have more staff in India than it does in its home market of France with 21,000

personnel+ in India.

On 25 June 2002 India and the European Union agreed to bilateral cooperation in the

field of science and technology. A joint EU-India group of scholars was formed on 23

November 2001 to further promote joint research and development. India holds observer

status at CERN while a joint India-EU Software Education and Development Center is

due at Bangalore.

INDIA'S IT INDUSTRY (IN USD BN)

Particulars FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

IT Services 10.4 13.5 17.8 23.5 31.0

- Exports 7.3 10.0 13.13 18.0 23.1

- Domestic 3.1 3.5 4.5 5.5 7.9

ITES-BPO 3.4 5.2 7.2 9.5 12.5

- Exports 3.1 4.6 6.3 8.4 10.9 -

Domestic 0.3 0.6 0.9 1.1 1.6

Engineering services, 2.9 3.9 5.3 6.5 8.6

R&D and Software products

– Exports 2.5 3.1 4.0 4.9 6.4

- Domestic 0.4 0.7 1.3 1.6 2.4

Hardware 5.0 5.9 7.0 8.5 12.0 -

Exports 0.5 0.5 0.6 0.5 0.5 -

Domestic 4.4 5.1 6.5 8.0 11.5

Total IT industry 21.6 28.4 37.4 48.0 64.0

(including hardware)

Major IT Hubs

RANKING CITY DESCRIPTION

1 Bangalore : Popularly known as the capital of the Silicon Valley of India is currently

leading in Information Technology Industries in India.

2 Chennai It is the Second largest exporter of Software next to Bangalore.

3 Hyderabad Hyderabad called as Cyberabad,

4 Pune Pune, a major industrial point in India. It is also referred to as Education Hub of

India. It was declared as Gamma-Global City recently. As one of the largest cities in

India, and as a result of its many colleges and universities, Pune is emerging as a

prominent location for IT and manufacturing companies to expand.

5 NCR The National Capital Region of India comprising Delhi, Gurgaon, Faridabad,

Noida, Greater Noida and Ghaziabad are having ambitious projects and are trying to do

every possible thing for this purpose.