Tech spends will grow but strong headwinds ahead

India’s technology industry is on track to double its revenue to $500 billion by 2030 as the country emerges as the fulcrum of an increasingly digitised world.

That’s according to Nasscom, which released its “Strategic Review 2023 – Priming For A ‘No Normal’ Future” report on the sidelines of the Nasscom Technology & Leadership Forum 2023 in Mumbai on Wednesday. The industry body estimates revenue in the tech sector will grow to $245 billion in the fiscal ending March 31 from $226 billion in FY22.

While I.T. services exports are likely to grow 11.4% year-on-year to $194 billion, domestic revenue is likely to increase 13% over the year ago to Rs 4.12 lakh crore (about $50 billion).

“In the no-normal environment that we are living in today, the industry focus continues to be on investing for growth,” said Nasscom President Debjani Ghosh on the sidelines of NTLF.

“Propelled by forward-looking policy, strong governance, talent, and digital trust to ensure accessibility, privacy, security, and reliability, the tech industry is on track to accelerate growth to $500 billion by 2030.”

Digital Drive
The proportion of digital tech in overall technology services revenue stood at 32–34% in FY23, up from 26%–28% in FY20, with analytics, cloud computing, and cybersecurity emerging as the fastest-growing segments. Nearly 50% of all enterprises are spending more than 20% of their total IT budget on digital.

That’s in line with India’s emerging as a powerhouse for deep-tech innovation. Global capability centres have had a role to play here as they are increasingly setting up shop here. India added more than 65 new GCCs in 2022, increasing their number to 1,570. Subsectors such as engineering R&D also witnessed double-digit growth of 11.1% last year.

India added 1,300 new startups in 2022, as well as 23 unicorns.

Talent Show
India’s technology workforce stood at 5.4 million in FY23, of which 36%, or two million, were women, the Nasscom report showed. Of these, two million are digitally skilled.

The industry added a net of 290,000 new jobs during the fiscal, even as the attrition rate declined to 21.8% in October-December from 25.7% in April-June.

The workforce is young as well: nearly 70% of them are millennials, while 20% are Gen-Z. About 85% of employees are working in hybrid mode from the 25 new Tier-II and Tier-III emerging tech hubs in India.

Headwinds And Tailwinds
Still, the sector isn’t without its fair share of troubles. Delayed decision-making, in the face of economic uncertainty and inflation, has resulted in demand contraction in some markets. New regulations as well as the employability gap are emerging as fresh challenges.

That hasn’t materially impacted dealmaking, though.

Indian I.T. services firms saw their client base expand by 10% year-on-year in 2022, resulting in a deal pipeline in excess of $18 billion at the top-five firms. The margin levers are still in play, with 6-7% utilisation headroom and easing attrition.

“FY23 has been another growth year for the industry, creating impact for the country and all our stakeholders,” Nasscom Chairperson Krishnan Ramanujam said. “Despite global headwinds, the industry has been able to strengthen its leadership in core and emerging areas.” Bloomberg