IT industry growth halves to 3.8% in FY24 vs 8.4% in FY23: Nasscom

This slowdown is driven by delays in deal closures, uncertainties due tech budget cuts of customers, layoffs and macroeconomic headwinds. (Representative image)

India's technology industry's revenue is expected to reach $253.9 billion at the end of the 2024 fiscal year, growing at a slower year-on-year rate of 3.8 percent, according to the Annual Strategic Review report by the National Association of Software and Service Companies (nasscom), released on February 16.

Overall growth projection has slowed down to a lower single digit, as compared to an 8.4 percent growth the tech industry body had projected in the previous fiscal year. This slowdown is driven by delays in deal closures, uncertainties due tech budget cuts of customers, layoffs and macroeconomic headwinds.

The industry will be adding an incremental $9.3 billion in revenue in FY24 across IT services, business process management, hardware, software products, and engineering services.

It has been a double whammy for Indian tech companies, especially the IT services companies, which gets over 60 percent of its revenue from markets like North America, that is currently seeing an economic slowdown.

Global technology spending growth rate too declined by 50%, from 8.2% in 2022 to 4.4% in 2023, the report said. Meanwhile, technology spending in AI had grown 30% in 2023, with an estimated spend of around $130 billion.

Rajesh Nambiar, Chairman & MD, Cognizant India and also Chairperson of Nasscom said: “Future of the country is tech driven. Overall we are number one as a global sourcing hub at $250 billion revenue. Nearly 90% of Fortune 500 companies are customers of Indian Tech companies. We are a significant contributor to India's GDP…Though this year has been slightly slower for the industry.”

The slowdown in growth numbers for the industry comes at a time when India’s economy has remained resilient as compared to other global economies like the US and UK. On February 16, Goldman Sachs India economist predicted that the country’s growth may exceed 6 percent for the rest of the decade, driving more investments from China into the South Asian country.

Hiring takes a hit

According to the report, the industry is poised to create 60,000 new jobs in the financial year 2023-24, taking the total to 54.30 lakh employees. This pales in comparison to the 2.7 lakh jobs that the tech sector created in the previous fiscal year.

“Because there was a lot of over-hiring done during the COVID year, we are seeing some level of correction happening, which is expected and needed for the industry," said nasscom president Debjani Ghosh. She added that hiring is moving towards jobs such as in artificial intelligence (AI), big data, cloud, cybersecurity, etc. “So the frontier technologies are where we are seeing the demand growing right.”

nasscom said that the industry has committed 60-100 hours per year per employee on upskilling. Giving an update on generative AI, the industry body said these activities have increased by nine times in 2023 year-on-year. Over 6.5 lakh employees are being trained on the nascent technology.

Ghosh also said that while the deal pipeline grew marginally, the big change came in the form of the size of the deals. Large deals grew  by 70% in FY24.

nasscom said it is designing a curriculum in collaboration with the industry to bridge the employability-skill gap. “Today, the skills that an average engineer or university graduate has is unfortunately not what is required by the industry and that gap continues to grow,” Ghosh said.

She further said students have to learn problem-solving foundations of mathematics, science, and statistics, which are important for any role in AI. The industry body is working with over 200 universities to bridge this gap, Ghosh said. “So what we do is, we bring in the best of the curriculum from the industry based on what they need and then we work with government and universities to scale it as much as possible with graduates,” she added.