Amid global concerns, IT spends among Indian govt bodies, pvt enterprises remain strong

According to an IDC report from April 25, information technology (IT) spending by Indian enterprises is set to grow by 7.8% this calendar year, despite concerns such as inflation, staffing shortage, and constraints in supply chain among clients. Spending, at present, remained resilient in CY22 — an IDC report from Tuesday said that domestic enterprise IT spending grew 8.1% last year to $10.87 billion.

A significant contributor to IT spending in India was government bodies and agencies, which increased tech spending by 11.5% in CY22 to $10.55 billion — with IT services, data centers and software projects being the fastest-growing sub-sectors. Government tech spending is expected to grow by a further 10.3% this year, to $11.63 billion.

This is in sharp contrast to revenue growth projections offered last month by India’s large- and mid-cap IT service providers, which cut revenue growth projections driven by an industry-wide slowdown. On April 13, Infosys, India’s second-largest IT services firm by market cap, projected FY24 revenue growth of 4-7% this fiscal — down from 15.4% revenue growth in FY23. Wipro chief executive, Thierry Delaporte, said on April 27 that the company expects a revenue decline of 1-3% in the June quarter.

Others, such as HCLTech, also disclosed revenue growth expectation of around half of FY23 — on April 20, C Vijayakumar, chief executive of HCLTech, said the company expects revenue growth of 6-8% in FY24, after registering a 13.7% revenue growth in FY23.

Industry experts and analysts said at the time that the reduction in revenue growth for India’s IT service providers is expected this fiscal due to a slowdown in tech spending in the banking and financial services sector, which contributes to nearly 30% of net revenue earned by India’s largest IT firms. Other industries, such as manufacturing and retail, are also projected to slow down, going forward.

Explaining why tech spending in India will continue to grow despite a global slowdown, a Gartner report on the IT sector, published on Wednesday by Apeksha Kaushik, principal analyst at the firm, said, “India’s governments will continue to focus on modernizing initiatives and their digital efforts for increased productivity, automation and other software-driven transformation. For example, they are ensuring public sector institutions in India build mobile-first experiences for their citizens, especially for those who don’t own a smartphone. Locally, Umang applications have been offering all services through a single portal to enhance government service-delivery experiences.”

Harish Krishnakumar, senior market analyst – IT services at IDC India, said, “Factors like chances of an impending recession, high inflation etc are not expected to cause a significant impact on the Indian IT services market in the near term. However, there will be a slight slowdown due to cutbacks in discretionary spending, delayed decision-making, etc in some segments.”

In October last year, Vinay Gupta, research director for IT spending guides at IDC APAC, said that IT spending is “expected to demonstrate resilience in the short term.”

“Indian enterprises continue to focus on their digital innovation initiatives, business operations resiliency, and customer experience programs. However, enterprises are keeping a sharp eye on global events,” he added.