The National Association of Software and Service Companies, or NASSCOM, and consulting firm McKinsey and Co. estimated that outsourced services will earn 110 billion dollars worldwide by 2010 and that Indian companies will get more than half of that business.

"India has the potential to capture more than 50 percent of this opportunity," said Noshir Kaka, a partner at McKinsey who helped prepare the report.

NASSCOM, the lobby firm for local software and service companies, said India now gets 65 percent of the global offshore software market and 46 percent in services.

Most of the new business is expected in outsourced work by insurance, retail, banking and travel companies abroad, the report said.

Software and services now add about 17 billion dollars to the economy and directly employ 700,000 people, the report said.

But to grow further, the report says, India will have to train more skilled workers and drastically improve its infrastructure.

Executives from McKinsey said that India needs to create 10 to 12 "knowledge cities" with housing, office space, good roads and airports to meet the needs of technology firms and their employees.

"We can't take another 1.6 million workers and add them to our cities now. Our cities are at a choking point," said Jayant Sinha, a partner at the consulting firm.

The report also said that the sector could employ about 2.3 million workers by 2010, but projected a shortfall of 500,000 skilled workers unless infrastructure and education is upgraded.

"Only 25 percent of technical graduates and 10 to 15 percent of general college graduates are suitable for employment in the offshore IT and BPO (Business Process Offshoring) industries," said Sinha.

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