Tale Of Two Cities
The end of 2022 was marked by news such as ‘the big trillion-dollar tech meltdown’, ‘the great layoffs’ and the like, headlining the commencement of a tough period for the global IT and tech industry. A series of cost-cutting and restructuring measures began that impacted other sectors as well, including startups, and India was not spared either.
India was already braving the funding winter last year and is now bracing for a slump in global tech services demand. This not only translated into significant layoffs across companies but also impacted campus hiring and revisiting required skill sets. While it is true that the situation is not as glorious as it was a year ago, at least in India, it is not all that grim.
Silver Linings
In its latest report, the World Bank said that India’s GDP growth is likely to moderate to 6.3 per cent in FY24 due to shrinkage in consumption on the back of slower income. The report added that India’s growth continues to be resilient despite these signs. India is one of the fastest-growing economies in the world despite significant global challenges. India's overall growth remains robust and is estimated to be “6.9 per cent for the full year with real GDP growing 7.7 per cent year-on-year during the first three quarters of the fiscal year 2022/23”, as per the report.
While the signs of deceleration are real, India is among the few countries, where some areas continue to grow. A case in point is tech startups. This is where a large part of layoffs took place but the direct-to-consumer brands continue to attract investment, capitalising on consumer behaviour and the likes of FOMO (fear of missing out) funding.
Tech-isation Continues
Apart from a steady economy, another factor contributing to India’s tech resilience is the growth trajectory in IT services. These companies have witnessed a moderation in growth in the last two quarters in constant currency terms owing to the base effect and evolving macroeconomic headwinds in key markets of the US and Europe. As per ratings agency ICRA, there will also be lower hiring by the IT service companies in the near term given that excess capacities were added in FY2022.
This being said, the country’s technology industry is estimated to grow by $245 billion, reflecting an incremental net revenue addition of $19 billion for the year as per Nasscom.
“FY2023 has been another growth year for the industry creating an impact for the country and all our stakeholders. Despite global headwinds and some moderation in demand, the industry value proposition of resilience, agility and a transformation partner for global enterprises, enabled the industry to strengthen its leadership in core and emerging areas,” explains Nasscom Chairman Krishnan Ramanujam.
Domestic Demand
The growth has been seen in IT services, BPM, software products, ER&D, and the domestic market.
“The domestic demand for tech solutions continues to be robust and despite the looming tensions, software spends is expected to grow at 13.7 per cent in 2023 according to Gartner. The pandemic kickstarted a slew of digital transformation initiatives designed to help organisations stay competitive. Many of these are still underway and while there may be some reprioritisation in projects due to headwinds, it is unlikely to see major cuts considering their long-term benefits,” adds Noshin Kagalwalla, VP & MD, SAS India.
The tech industry is also a net employer, creating 2,90,000 new jobs in FY2023. With a 36 per cent digitally skilled workforce, the industry remains on the top in terms of AI skills penetration, the second-largest in terms of AI/machine learning and big data analytics talent pool globally, and the third in terms of installed supply of cloud professionals.
Full Throttle 5G Rollout
The 5G technology is another area to be bullish about. Indian telecom operators have surpassed the three-year 5G network rollout target given to them within six months and now the government is making efforts to enhance the adoption of 5G applications across various key segments.
Telecom minister Ashwini Vaishnaw informed that state-owned BSNL will start 5G services by April 2024 as well. 5G will impact a slew of industries including education, health, agriculture, media and entertainment and will also give a fillip to the startup sector.
fAkash Ambani, Chairman, Reliance Jio Infocomm stated at a forum that given the speed at which the firm has rolled out 5G in the past five months, it will cover the entire country by December 2023.
“Although 5G technology is still in its relative infancy, the potential uses of 5G networks goes far beyond mobile devices. By extension, the monetization opportunities for India’s telcos will too. Indeed, the fast speeds, high capacity, and low latency of 5G, combined with India’s vast population and wireless market, translates into vast possibilities. These range from self-driving vehicles to smart factories,” Yijing Ng, an Associate Director at S&P Global Ratings.
Enabling Growth Levers
The 5G technology will also benefit enterprise solutions. Many industries can ride on it and this in turn will be akin to a growth driver. India’s tech industry is undergoing a dual phenomenon of slowdown and growth. But in the long term, many factors are coming together to make a strong case for India’s ‘techade’.
