India is likely to be the fastest growing market for IT services in the Asia-Pacific region, according to research firm Gartner Inc.

Multinational IT services companies that have set up offshore operations in India will use their local delivery centers not only to serve clients abroad, but also in the domestic IT market, which grew by 15 per cent in 2003 over the previous year, said Gartner, which is based in Stamford, Connecticut. Indian players have primarily focused on markets outside India, and may need to ramp up capability quickly for capturing the domestic market, Gartner said.

“At a CAGR of 17.3 per cent, India is expected to be the fastest growing IT services market in the region, as compared to the global average of six per cent, making it faster than its Asian counterparts, including Singapore, China and Australia,” said Craig Baty, Gartner’s group vice president and chief of research at a Gartner conference Tuesday in Mumbai.

The compound annual growth rate (CAGR) Gartner projects for India compares to 15.6 per cent forecast for China, and 8.7 per cent in Australia, between 2003 and 2008.

Growth in India’s IT services market will be driven primarily from government contracts, growing demand from banking and financial services and the manufacturing sector, Baty said.

Other factors helping to boost demand for IT services in India are stable economic growth, increased global competitive pressures on local industry, improved infrastructure and increased investments by multinationals setting up offshore IT and business process outsourcing (BPO) facilities, according to Ravindra Datar, Gartner’s principal analyst for IT services and BPO for the Asia-Pacific region.

“Essentially, [Indian companies] should look at playing the volume game, deploying innovative strategies in the SMB (small and medium business) sector, and showcase their global successes in the Indian market or risk losing out to global players,” he said.