Indian tech sector growth rate slows down in FY23

After touching decadal-high growth rates in FY22, revenue growth for Indian tech industry nearly halved in FY23, according to Nasscom’s annual review for the tech industry for FY23. According to Nasscom’s estimates on Wednesday, the Indian IT sector will achieve a revenue of $245 billion in FY23, an 8.4 per cent growth in revenues from the FY22 revenues of $226 billion. Last year, the revenue grew at twice the rate to $226 billion at a growth rate of 15.5 per cent. 

Economic uncertainties such as rising inflation and uncertainty in the economic environment could serve as dampeners for the tech sector. Nasscom added that while it is cautiously optimistic for FY24, given the economic headwinds it is hard to predict the outlook for FY24. Nasscom Chairperson and President of Enterprise Growth Group at TCS, Krishnan Ramanujam, added that growth in the tech sector in FY24 will likely be approximately the same as in FY23.

While cautious optimism is the mantra for the Indian tech industry in FY24, the report also highlighted that factors such as delayed decision-making as a result of economic uncertainty, employability gap in emerging tech roles, demand contraction and emerging tech regulations will be headwinds for the growth of the Indian tech industry in FY24. 

In line with global trends, the Indian tech sector is also seeing a downturn currently, Ramanujam explained: “In the past two years of the pandemic we have seen two dichotomous trends. On one hand, we were coming from a period of growth we have never seen before, which is why there was exaggerated euphoria which needed to be corrected.”

According to Nasscom estimates, the Indian tech sector has directly employed 5.4 million people with over 290,000 new jobs added in 2023. However, the employability gap in the emerging tech roles was also highlighted as one of the headwinds for the coming fiscal year in the report. Attrition also declined in FY23, going down from 25.7 per cent in Q1FY23 to 21.8 per cent in Q3 FY23.

On the issue of stagnation in fresher salaries in major tech companies, Debjani Ghosh, President at Nasscom noted that unified recommendations from the tech association cannot be provided since hiring strategies are the key differentiator in demarcating competition in the tech space. However, Ghosh added that “we (the tech industry) are paying more than other industries as fresher salaries as a rule. Moreover, improvement of the pay scale is at a faster trajectory in this industry as compared to others.” Highlighting India’s tech talent, the report added that approximately 2 million of the workforce employed by the Indian tech industry is digitally skilled. India ranks number 1 in AI skill penetration, number 2 kn AI/ML/BDA talent pool and number 3 in cloud professionals.

The Indian tech story for FY23 was one of resilience, where despite headwinds the industry achieved growth. Stronger growth was seen in the US and Asia Pacific with industries such as Healthcare, Manufacturing and BFSI performing well. The travel and the utility sector saw weaker growth and predictably, Europe was highlighted to have seen low growth.

As of the completion of FY23 India boasts a 27000-strong startup ecosystem. However, Ghosh highlighted that India’s deep tech startup ecosystem still has room for growth. As per the report, at present India has 3000+ deep tech startups out of which, 485+ are inventive deep tech startups. 

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