Nasscom Forecasts 3.8% Growth, Anticipates Indian IT Industry to Surpass $250 Billion in FY24

In light of the Indian information-technology (IT) industry's growth decelerating to a single-digit figure, achieving the ambitious $350 billion target by 2026 appears challenging. Nasscom predicts the sector's growth to reach $253.9 billion in FY24, showcasing a modest 3.8% year-on-year expansion, marking a decrease from the 8.4% growth observed in the previous fiscal year. The deceleration is notably reflected in the incremental revenue addition, dropping from $19 billion in FY23 to $9.3 billion in FY24.

Challenges and Global Trends:

Nasscom reports a substantial 50% global decline in tech spending, coupled with a 6% decrease in tech contracts throughout 2023. Discussing the target of $350 billion by 2026, Debjani Ghosh, Nasscom's President, states a reassessment is imminent based on the industry's 2023 performance and the evolving landscape in 2024.

India's Tech Landscape:

According to Nasscom's "Strategic Review 2024: Rewiring Growth in the Changing Tech Landscape," India maintains its position as the world's largest sourcing hub, contributing 1% to the country's GDP through digital public infrastructure.

Employment Dynamics:

Despite the subdued growth in FY24, the Indian tech industry remains a net hirer with a concentrated effort on upskilling. The industry aims to add 60,000 jobs in FY24, a substantial decrease from the 290,000 added in FY23. The strategic review emphasizes the commitment to upskilling, targeting 60-100 hours per year per employee.

CEO Sentiment and Outlook:

Nasscom's CEO survey indicates an optimistic outlook for both revenue and hiring, suggesting an improvement in sentiment compared to 2023. While the hiring numbers for FY24 are lower, the industry anticipates a potential uptick in the second half of 2024.

Emerging Growth Areas:

The industry sees potential growth areas in engineering, research and development (ER&D), global capability centers (GCCs), and artificial intelligence (AI). GCCs are expanding and investing in India, witnessing an addition of 53 new GCCs in 2023. Domestic revenue experienced a notable 5.9% growth, surpassing exports.

Focus on AI:

The industry is actively engaged in AI initiatives, with over 70% having well-defined frameworks for financing use cases. The Nasscom BCG AI acceleration analysis indicates a significant increase in generative AI (GenAI) activity in CY23.

Industry Highlights

• India remains the world's largest sourcing hub, contributing 1% to GDP through digital infrastructure.

• Despite the slowdown, the industry is a net hirer, expected to add 60,000 jobs in FY24 (down from 290,000 in FY23).

• Upskilling remains a priority, with 60-100 hours per employee per year dedicated to it.

• CEO surveys indicate an improved outlook for FY25, with 66% expecting higher client budgets.

Green Shoots and Future Growth Drivers

• Engineering, research & development (ER&D)

• Global capability centers (GCCs) witnessing expansion and new setups (53 added in 2023)

• Domestic market revenue growing at a record 5.9%, 1.8 times faster than exports

• Growing adoption of AI, with over 70% of players having frameworks for financing use cases and a ninefold increase in generative AI activity

AI and Job Impact

While AI adoption is increasing, Nasscom president Debjani Ghosh assures there are no job losses due to AI currently. The bigger challenge lies in the rapid pace of technological change outpacing the ability to upskill workers.

Challenges of Technological Advancements:

Addressing the adoption of AI and GenAI, Nasscom acknowledges the industry's challenge in coping with the rapid pace of technological change, potentially outstripping the ability to skill people. Debjani Ghosh emphasizes that, as of now, there have been no job losses due to AI, but the industry must grapple with the accelerating rate of technological and skill-based transformations.

Conclusion

The Indian IT industry faces a challenging global environment, but its resilience and focus on emerging areas like AI and GCCs offer hope for future growth. While the $350 billion target by 2026 might need revision, reaching $250 billion in FY24 is a significant milestone. With continued upskilling and adaptation, the industry can navigate these uncertain times and emerge stronger.