IT industry to grow 3.8% in FY24 to cross $250 billion, says Nasscom

FY24 growth coming at a slower pace, from a growth rate of 8.4% last year

With the Indian information-technology (IT) industry’s growth rate falling to a low single digit, the ambition of becoming a $350 billion industry by 2026 seems a difficult task.

The sector is expected to touch $253.9 billion in FY24, growing at 3.8 per cent year-on-year.

Growth has fallen from the 8.4 per cent in the previous financial year.

The slower pace of growth is evident in incremental revenue addition. In FY23 it was $19 billion, which has come down to $9.3 billion in FY24.

According to Nasscom reports, globally tech spending has slid around 50 per cent and three has been a 6 per cent decline in tech contracts in 2023.

On the target of $350 billion by 2026, Debjani Ghosh, president, Nasscom, told the media at a virtual press conference: “Based on the 2023 performance and how 2024 pans out, we want to redo the modelling and see where we land. There are a lot of opportunities. We are looking into these and we will come back to it sometime this year.”

India, according to Nasscom’s “Strategic Review 2024: Rewiring Growth in the Changing Tech Landscape”, continued to be the world’s largest sourcing hub, which added 1 per cent to the country’s gross domestic product (GDP) through digital public infrastructure.

Rajesh Nambiar, chairperson, Nasscom, and chairman and managing director, Cognizant, said the good news was that the industry had continued to grow, but he did agree that growth in FY24 was muted.

Despite the downturn, the Indian tech industry continues to be a net hirer with a focus on upskilling. The industry is expected to add 60,000 in FY24 though this is a big fall from the 290,000 in FY23.

The strategic review states the industry is committed to spending 60-100 hours per year per employee on upskilling. When asked if the hiring numbers would continue to be tepid, Sangeeta Gupta, senior vice-president and chief strategy officer, Nasscom, said: “The CEO (chief executive officer) survey poll that we ran shows an improvement in outlook for both revenue and hiring. What the actual numbers will be only time will tell. But the sentiment is better than 2023.”

For FY25 the CEO survey by Nasscom said the majority expected an uptick in the second half of 2024. On technology spending, 66 per cent of the CEOs said client budgets in FY25 would be higher than in FY24. About 20 per cent said FY 25 would be similar to FY24.

Meanwhile, the strategic review said the CEO survey did show improvement in sentiment, but many expect 2024 to be similar to 2023.

However, the industry does have some green shoots and perhaps these could well be the driving force of the future. These include engineering, research and development (ER&D); global capability centres (GCCs); and artificial intelligence (AI).

GCCs continue to invest in India, expanding their service portfolios. At the same time new GCCs are setting up operations. There was an addition of 53 GCCs in 2023.

An interesting aspect of the growth was domestic revenue grew 5.9 per cent, the fastest ever. The review stated the domestic market grew 1.8 times faster than exports.

On AI, the review said the industry was working on it. According to Nasscom BCG AI acceleration analysis, over 70 per cent of the players have well-defined frameworks for financing use cases and over 10 generative AI use cases. When it comes to GenAI, there has been a nine times increase in GenAI activity in CY23.

When asked if the adoption of AI and GenAI would impact hiring, Ghosh said as of now there were no job losses due to AI.

“The problem we will face is that the pace of technology change and of change in job skills will happen at a rate much faster than our ability to skill people.”