Tech industry revenue to reach $245 billion in FY23, 2.9 lakh new jobs created: Nasscom

The tech industry's revenue in India will reach $245 billion at the end of the 2023 fiscal year, according to the Strategic Review report by the National Association of Software and Service Companies (Nasscom), released on March 1. According to the report, the industry grew at 11.4 percent in constant currency terms.

“Propelled by forward-looking policies, strong governance, talent and digital trust to ensure accessibility, privacy, security, and reliability, the tech Industry in India is on track to accelerate growth to $500 billion by 2030,” said Nasscom President Debjani Ghosh.

According to the report, the tech industry is a net creator of jobs, with 2.9 lakh jobs being created in FY23.

The report said that the industry is at the top when it comes to penetration of IT skills, and is the second largest in terms of Artificial Intelligence/Machine Learning Big Data Analytics talent pool. In terms of the installed supply of cloud professionals, India ranks third.

Of the total 54 lakh workers employed in the sector, 20 lakh are women, the report said.

"With 36% digital skilled workforce, the industry showcases a deep focus on bringing diversity to the workplace reporting a net addition of over 140k women employees during the year," the report said.

The growth was primarily seen in segments of IT Services, BPM, software products, ER&D and in the domestic market.

The report also stated that the estimated net addition in FY23 is higher than it was in pre-COVID levels. This comes at a time that the net addition numbers of IT Services companies, which are some of the highest recruiters, have significantly declined.

Responding to a query, NASSCOM chairperson Krishnan Ramanujam said that FY21 and FY22 were atypical years, and using that as a baseline to compare it to the next year is not a fair comparison. From a pre-COVID perspective, the growth is on the upswing, he said.

“It is true that there are a lot of storm clouds gathering. It doesn't seem to rain yet, but the fear is going to rain is very palpable and very present across the board, which is why we say that it's difficult to call. We are cautiously optimistic, and the reason there is caution is all there to see because of the recession, macroeconomic and geopolitical risks that are there,” he said.

He added that there is optimism because “technology is the solution to the enterprise's problems, government problems, and even the planet's humankind's problems. From a long-term point of view, structurally, our industry, the technology industries, as well placed as any industry could be”.

Furthermore, the export revenue of the Indian services industry is expected to reach $194 billion. The report said that there was also an uptick in digital spending by Indian enterprises, and revenue from the geography increased by 13 percent in rupee terms.

In terms of major geographies that are witnessing growth, NASSCOM said the growth was visible in North America and the Asia Pacific markets. In terms of sectors, growth was visible in the BFSI, manufacturing and telecom spaces.

Outlining the tailwinds for the sector, the report stated that the top 5 tech companies have a robust deal pipeline of $18 billion, have seen a roughly 10 percent growth in their client base in 2022 as opposed to the previous year, and that enterprise tech spending is rising. There are also margin levers, it said, with a 6-7 percent headroom in terms of utilisation figures.

However, headwinds include delayed decision-making due to the current macroeconomic climate, employability gap in emerging tech roles, demand contraction in some markets as well as emerging tech regulations. Ghosh added that while the government can’t regulate tech overall, it should look at regulating specific use cases.

“You cannot regulate technology, no government can regulate technology. You have to start regulating use cases. You have to look at risk-based use cases and figure out how to regulate use cases. That's the shift we have to see,” Ghosh said.

In terms of the startup environment, the report stated that, despite the uncertainties, particularly the funding winter, startups focused on fundamentals and governance. In 2022, over 1,300 startups were added, bringing the total to around 27,000, and 23 unicorns were minted.

Of these 27,000 startups, 3,000 are deeptech startups. However, Ghosh acknowledged that number of deeptech startups in the country needs to be higher.

“The proportion of digital tech in the overall technology services revenue has been increasing year after year. From only around 26-28% in FY2020, to leapfrogging to over 32-34% in FY2023, there has been increasing penetration of digital tech in the industry. Within this, Analytics, Cloud, and Cybersecurity are emerging as the fastest growing segments wherein the share of Cloud deals was reportedly 4X of pre-pandemic levels,” the report said.