Statsguru: Six charts show India's technology sector on firm ground

Information technology, or the technology sector, has been a highlight of the Covid times, being one of the few areas that remained resilient under the shadow of an unprecedented crisis. It has delivered growth, given strong returns, and retained jobs, strongly supporting private consumption. A recent report by Nasscom underlined a few points that showcase the sector’s firm footing. 

Revenue of India’s tech industry is set to grow sharply in 2021-22 (FY22), from $197 billion to $227 billion, exhibiting a growth that is fastest in at least the last five years. Most of it comes from exports (chart 1). India’s IT revolution began with domestic companies providing services and support to global IT majors. IT services still remains a major and strongly growing contributor to the nation’s tech exports (chart 2). Software products, which are driving the global tech industry today, are in the nascent stage in India’s export mix. India’s tech companies — leaders and upcoming ones — can capitalise on the future, which the majority of tech leaders believe will be better than the current phase (chart 3).  

India’s IT companies have done well since Covid began. On the National Stock Exchange, IT stocks are strong outperformers compared to the Nifty 50 index, which tracks the 50 biggest companies listed on the exchange (chart 4). The rally has been largely due to strong fundamentals of Indian IT companies. What is also visible is that the top five companies have registered better growth than smaller companies. The top-five command a revenue of Rs 4.4 trillion as of FY21 (chart 5).

IT companies have maintained the share of revenue they spend on human resources, which form their backbone. Employees’ compensation commands the biggest chunk of expenditure in tech companies, and its share in operating revenue has remained above 50 per cent for large domestic firms (chart 6). Smaller IT companies have also improved on their payouts to employees in recent years.

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