2025 Likely To Be A Better Year For Indian IT Industry After Two Years Of Slowdown

2024 has been a mixed bag for the Indian IT industry. What started as a tepid growth period in the beginning, slowly led to some growth revival towards the latter part of the year. Rising demand in the BFSI industry coupled with gradual rise in technology spending among US enterprises raised hopes of a full-fledged recovery in 2025. Especially, 2025 could see revival in discretionary spend on which Indian IT industry is betting big.

In an interaction with Bizz Buzz, Pareekh Jain, Founder of Pareekh Consulting & EIIR Trend said overall 2025 is likely to be a better year for the Indian IT industry after two years of slowdown. On the Trump administration, Jain said that H1B visa may not be major concern under the new administration. He also said that the appointment of senior technology leaders at White House is a good news for the AI industry as it may lead to more democratisation of AI-led innovation

How do you see 2024 for the Indian IT services industry? Give some perspective in this matter.

For both global & Indian IT industries, there was a slowdown across many geographies and verticals. Discretionary spend was down owing to the war (Russia-Ukraine) and uncertainty around the US presidential elections. Sector specific issues pulled down demand in BFSI (banking, financial services & insurance), telecom and manufacturing (towards the later part of the year). Overall, 2024 is not a good year for Indian IT industry though there is some ray of hope coming towards the end of the year that the discretionary spend will come back.

Recent results of Accenture and growth recovery in BFSI vertical indicate towards its likelihood. In 2024, another important development is that GenAI is now taken as the next wave. It is here to stay. That is a definite positive for Indian IT industry.

Can 2024 be interpretated as a good year for Indian engineering services players?

This year is overall a good year for engineering services companies though the latter part of the year, growth slowdown is seen. It is opposite to what has happened to Indian IT services players. IT services and engineering services segments are performing in different ways in the last two-three years. While IT services have not performed well in the last two years, engineering services segment has done well. However, trends shifted towards the latter part of 2024 as growth slowdown was seen in the automotive sector.

Automotive sector has been one of the growth drivers for Indian engineering services companies. Engineering services have been witnessing growth in their revenues in high single digit to double digit. Automotive and aerospace have been the prime drivers of this growth. These two sectors have seen slowdown in the last two quarters. So, going may be tough for engineering services in 2025, while prospects for IT services look better.

What will be possible impact of Trump administration taking over from January 2025 on IT services industry as a whole and Indian IT industry in particular?

Though there are many unknowns with regard to the next US administration, overall things look positive. Concerns with regard to H1B visa may not materialise as there is a strong industry lobby like Elon Musk and other tech leaders are behind Trump administration. As far as raising tariff is concerned, it is likely to happen under the new administration. But Trump’s promise of cutting tax rates will definitely give boost to technology spending. Also, a favourable interest rate cycle will play its role. So, no major downfall is anticipated under Trump administration.

Another major issue, that is being deliberated, is related to cutting Federal government’s expenses. But the US government is a major spender of IT. But it may not impact Indian service providers as they don’t have much exposure to Federal contracts. It may impact global players. It has to be seen what kind of trickle-down impact is played out on the Indian IT services players. That is one area, which needs to be watched out.

The President-elect of US, Donald Trump has appointed David Sacks as the White House AI and Crypto Czar with roping in Indian-origin, Sriram Krishnan as senior advisor. What kind of policy regulations are expected from the new US administration? Is it good or bad news for the global technology industry?

It is definitely positive for overall technology industry. The fact that they are roping in senior leaders from the tech industry means they are serious about it. Only thing the new administration seems to have in mind is that they don’t want AI-related innovations to be controlled by a few (corporations). Overall, initial signs are that they want to regulate it so that AI will be more democratised.

After one and half year of lull, we have seen a bit of uptick in IT hiring. Indian IT firms have gone to campuses this year around and the numbers of new recruits of Accenture are encouraging. Will 2025 be a better year as far as hiring is concerned in the IT sector? Will it reach the level of hiring during post pandemic days?

It is likely to be a better year in terms of hiring. We have already seen hiring has gone up as service providers are adding to their overall headcount. Accenture result is definitely showing the trend. However, this time is different from post pandemic years in terms of advent of generative AI (GenAI).

So, there is a fear that service providers will require a smaller number of people than they used to. However, recent hiring trend shows that there is no job loss on net basis. So, in 2025, the total headcount is expected to increase. However, companies will be cautious with GenAI making inroads.

This is good news for freshers. There is also a lot of debate with regard to fresher salary (which has remained stagnant for a decade now). So, there is a likelihood that fresher salary will see some uptick.

This year, Indian IT services industry saw many leaders existing and joining. Even, this was the trend in many global firms. Can we expect stability with regard to leadership in 2025? What are your views on this matter?

Generally, leadership churn happens when things are tough. In the last two years, IT industry was going through a slowdown. Therefore, we saw many senior levels hiring and exits. But in 2025, top level leadership change may not be that high as those new leaders require at least 2-3 years to execute their plans. Other way round, engineering services industry may see some leadership churn this year as things are expected to be tough in 2025.