The IT industry’s growth rate may slow down in the upcoming fiscal year in India. Indian ratings agency ICRA’s recent report predicts a lower rate of discretionary IT spends in the next quarters. This comes after a higher rate of hiring practices done by Indian IT companies in the previous fiscal year. In fact, the sector is gradually moving towards reducing its hiring capacities due to lower growth rates in the last two quarters owing to an evolving macroeconomic headwinds in essential markets especially Europe and the United States of America. Changing macroeconomic practices in these key areas have created various uncertainties. The ICRA reportedly made its predictions based on some possible adverse regulatory changes in these key spaces.
ICRA’s test set of major IT services agencies reveals a yearly revenue growth of 18.4 per cent in Rupees and 9.9 per cent in terms of Dollars in nine months of FY2023. By comparison, it is substantially lower than that of FY2022 which showed about 17-18 per cent growth in terms of US Dollars.
The downward trajectory of IT industry growth has reduced spending capacities for IT agencies which has resulted into moderated profits owing to inflating salary expenditures and relatively stable profit gains from services provided. The Indian IT industry is also facing the challenge of a high rate of employee attrition in recent years, led by factors such as demand-supply gap for digital tech talent and other related variables.
Apart from the upcoming slowdown in the growth trajectory, ICRA continues to maintain a stable opinion on the Indian IT industry due to its cost competitiveness in the global market alongside a growing demand for IT services in the form of both digital and cloud services.