Tech sector growth slows as pandemic boost wanes

The Indian technology industry, which saw explosive growth during the pandemic, will grow at a more modest 8.4 per cent to $245 billion in the current financial year, tech lobby group Nasscom said on Wednesday.

The forecast comes as its clients, which spent generously on digital transformation during the peak of Covid-19, take longer to decide on future contracts and curtail spending amid economic uncertainties and inflationary pressures, leading to a fall in demand in some markets.

The industry had grown at 15.5 per cent — its best in a decade — to $226 billion in FY22 as it gained from the pandemic-induced digital services boom. The group did not give a revenue growth forecast for the upcoming financial year.

“The industry priorities in this ‘no normal’ environment will need to focus on scenario planning that tracks all the different parameters, shift from provider to digital transformation partner, investment in digital capabilities and emerging tech, enhance focus on learning and upskilling and build the value enablers of trust, inclusion and sustainability,” the lobby group said.

Almost 75 per cent of chief information officers expected spending on digital initiatives to continue with evolving priorities as per changing macroeconomic environment, the group said, citing a McKinsey CIO survey.

In addition to macro factors, the group highlighted the employment gap in emerging tech roles and tech regulations as hindrances to the sector’s growth in the upcoming financial year.

The forecast includes growth across segments of IT services, BPM, software products, ER&D and the domestic market.

Mirroring the trend, the Indian service export revenue is likely to rise 9.4 per cent to $194 bn in reported currency in FY2023. The group expects revenue from US market to grow 10.4 per cent and that from Asia-Pacific market to rise 10.1 per cent this fiscal, with growth in core sectors like banking and financial services, manufacturing and telecom.

“In a no-normal environment that we are living in, the industry focus continues to be on investing for growth,” Nasscom chief Debjani Ghosh said.