SOHO to drive Indian PC demand according to IDC.
Thursday, November 26, 1998
Info-Tech
SOHO will drive Indian PC demand, says IDC
Date: 26-11-1998
Our Bureau
NEW DELHI, Nov. 25
IDC (India) has predicted that, despite an economic slowdown, the domestic PC market is headed for explosive growth in the coming years. Home, small office and small business segments have a large untapped potential and hold tremendous promise for the future according to IDC.
According to IDC, in the first half of 1998-99, the only segments that have witnessed healthy growth rates are home, small office and small business. These segments are relatively less affected by the economy than the large and medium businesses. As a result products such as PCs and peripherals have shown better growth rates compared to other hardware products.
The growth rate in unit terms is expected to increase every year till 2000-01. Between 1997-98 and 2000-01, the Indian PC market is expected to grow at a CAGR (compounded annual growth rate) of 41.3 per cent in unit terms and 12.2 per cent in terms of value (see Table).
The results of the first half of 1998-99 indicate that by the end of the current fiscal, the growth in the domestic IT market would be around 16.5 per cent. This growth rate has been lower than the previous year (18.1 per cent) primarily due to poor economic conditions and political instability.
IDC (India) has drawn up three scenarios for the future of the PC market in the country. In the most optimistic scenario, a positive swing can increase the CAGR to almost 47 per cent (by units). Even in the worst case, the growth rates in terms of units will improve year on year till 2000-01. However, with the average price of PCs expected to decline dramatically in the coming two years, growth in value terms may be constrained, cautions IDC.
Scenario 1 (optimistic): Due to a high level of unsaturated demand, the high growth rates in the home, small office and small business segments will be sustained till 2000-01. The price of entry level desktops will reach Rs. 20,000 in 2000-01, thereby driving the demand in the home, small office, small business segments further.
The ISP policy will also give a major boost to PC sales in the home and small office segments. The economy will start looking up in 2000-01, as a result of which buying in Government, large and medium business will improve in 2000-01. Government spending on account of the Task Force recommendations will increase significantly in 2000-01.
Scenario 2 (realistic): The growth rates in the home, small office, and small business segments will reach a peak in 1998-99, after which they will start tapering off. The real impact of the ISP policy will be felt only in 2000-01. As the economy continues to remain under pressure, segments such as the Government, large and medium businesses will show a small increase in growth rates till 2000-01. Duty drops on components will be effective from January 1999, but its impact will be offset by inflationary trends in the near future.
Scenario 3 (pessimistic): The economy will remain under pressure and improvements in GDP and industrial growth will not be substantial. Spending by large businesses and Government segments will not improve.
The pressures of the economy will be felt even by the home, small office and small business segments.
In each of these scenarios, home, small office and small business segments are expected to grow at consistently higher rates than the overall average and, hence, will be the main drivers for growth in the PC arena, IDC reasons. The revised estimates are based on projections for the second half of 1998-99 and IDC's political and economic outlook
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