IT growth rate halves in FY24 as slowdown bites

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 - Debjani Ghosh, President, Nasscom

Bengaluru: Slowdown pangs are likely to pull down the overall growth of Indian IT industry in FY24 as the Indian technology industry’s revenue is expected to grow at 3.8 per cent to reach $253.9 billion, according to the Annual Strategic Review report by the National Association of Software and Service Companies (Nasscom).

This growth rate is less than half of last fiscal year’s growth rate of 8.4 per cent. Indian IT industry has been facing slowdown in the ongoing financial year owing to delays in deal closures, IT spending budget cuts of customers, layoffs and macroeconomic headwinds.

In the current financial year, the industry will be adding an incremental $9.3 billion in revenue across IT services, business process management, hardware, software products, and engineering services.

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 is way below 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, and cybersecurity among others. “So, the frontier technologies are where we are seeing the demand growing right.”

The IT industry body also 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.

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 per cent 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.”

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 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 mathmatics, 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.

Indian IT industry has faced substantial slowdown in the current financial year owing to macroeconomic headwinds globally. While large IT firms are likely to post single digit revenue growth rate in FY24, most mid-tier firms are expected to witness a sharp fall in their top line growth during this period.

The IT industry, which has been at the forefront of job creation, has been shedding employee count for the last three quarters owing to such slowdown.