CNBC's Inside India newsletter: The 'sticky' outsourcing firms on the rise

This report is from this week's CNBC's "Inside India" newsletter which brings you timely, insightful news and market commentary on the emerging powerhouse and the big businesses behind its meteoric rise. Like what you see? You can subscribe  here.

India has long been the destination for companies in developed markets to outsource labor intensive tasks.

However, several new technology firms in the country aim to gain a share of research and development budgets – money previously protected for spending in Western markets.

Over the years, the services sector of the Indian economy has grown to account for 45% of total exports, up from 30% a decade ago. Business process outsourcing, or BPO, which includes customer support, drafting contracts or producing mass marketing campaigns, makes up more than three quarters of services exported by value, according to consultancy Capital Economics.

Relatively low labor costs and high IT literacy has contributed to services exports growing by nearly 20% annually over the past two years, significantly faster than the 5% year-on-year increase in goods.

The Indian government, meanwhile, has been eager to support the manufacturing sector in creating mass employment, a key economic and political challenge that the services sector alone hasn't been able to address.

However, India has also long suffered from the lack of sufficient high-tech companies and jobs leading to one of the largest "brain drains." For companies, one way to solve this has been to nab a piece of their Western clients' previously inaccessible research and development budgets.

For instance, the engineering firm Cyient does research and development for 300 firms, including Microsoft and Siemens, across several industries, primarily