Tech industry growth projected to halve to 3.8% in FY24 compared to FY23

Industry expected to generate additional $9.3 billion in revenue, spanning across IT services, business process management engineering services: Nasscom

India's technology industry is projected to have earned $253.9 billion in revenue in Financial Year 2023-2024 (FY24), marking a slower year-on-year (Y-o-Y) growth rate of 3.8 per cent, according to a report.

Moneycontrol.com, while citing the Annual Strategic Review report of the National Association of Software and Service Companies (Nasscom), said the industry’s growth projection has slowed to a lower single-digit figure compared to the 8.4 per cent forecasted in FY22. This slowdown in FY24 is attributed to delays in deal closures, uncertainties arising from tech budget reductions among customers, layoffs, and macroeconomic challenges.

Moneycontrol reported that in FY24, the industry is expected to generate an additional $9.3 billion in revenue, spanning across information technology (IT) services, business process management, hardware, software products, and engineering services.

Indian technology companies, particularly IT services firms, are under pressure as they depend on markets such as North America for over 60 per cent of their revenue and that region is experiencing an economic slowdown.

Moneycontrol reported that the global technology spending growth rate has dropped from 8.2 per cent in 2022 to 4.4 per cent in 2023. However, spending in artificial intelligence (AI) technology experienced a 30 per cent growth in 2023, amounting to an estimated expenditure of around $130 billion.

“The future of the country is tech driven. Overall, we are number one as a global sourcing hub at $250 billion revenue. Nearly 90 per cent of the Fortune 500 companies are customers of Indian tech companies. We are a significant contributor to India's GDP... though this year has been slightly slower for the industry,” said Rajesh Nambiar, chairman and managing director of Cognizant India and the chairperson of Nasscom.

The technology industry's slowdown coincides with India's economy maintaining resilience in comparison to other global economies such as the US and the UK. In February this year, a Goldman Sachs economist said India's growth could surpass 6 per cent for the remainder of the decade, potentially attracting increased investments from China into the South Asian nation, according to the Moneycontrol report.

The industry is set to generate 60,000 new jobs in the financial year 2023-24, bringing the total to 5.43 million employees. This is significantly lower than the 270,000 jobs the tech sector added in the previous fiscal year.

Nasscom president Debjani Ghosh said the hiring is moving towards jobs in AI, big data, cloud, and cybersecurity, Moneycontrol reported.

Talking about the importance of AI, she said that students should learn problem-solving foundations of mathematics, science, and statistics, which are important for any role in AI. She said that the industry body is working with over 200 universities to bridge this gap.

Moneycontrol quoted Ghosh as saying, “So what we do is, we bring in the best of the curriculum from the industry based on what they need and then we work with government and universities to scale it as much as possible with graduates."