Sectoral Analysis: Tech

Sectoral Analysis: Tech

The IT sector is a major driver of economic growth in India and contributed 7.5 percent to the country’s GDP in FY23. The IT sector is likely to reach $350 billion by 2026, contributing 10 percent to the country’s GDP.

By 2025, the Indian software product industry is projected to hit $100 billion as companies seek to expand globally while the data annotation market is expected to grow to $7 billion by 2030. Business Process Management accounted for 22 percent while software products accounted for 25% of total IT exports.

Strength Analysis of IT Sector

India’s IT sector has shown consistent and impressive growth in the past two decades. This phenomenal growth is pushed by a large pool of technically skilled professionals. The sector benefits from low operational costs compared to developed countries, which makes India an attractive destination for global outsourcing.

Weaknesses Analysis of IT Sector

The IT sector relies heavily on overseas markets, particularly the U.S., making it vulnerable to global economic fluctuations. Also, there is a shortage of specialised skills in emerging technologies like AI, machine learning, and cybersecurity, and certain regions still grapple with lack of infrastructure which hinders business operations and scalability.

Opportunities Analysis of IT Sector

The increasing digital adoption across various industries presents opportunities for IT firms to expand their services and the rising demand for AI solutions and automation tools offers IT companies a chance to innovate and capture new markets. Also, the continued government support and investment in technology infrastructure can boost the growth in this sector.

Threats Analysis of IT Sector

The IT sector in India faces competition from other emerging economies, such as China and the Philippines, which are offering services at competitive rates. The changes in government regulations can also impact operational processes and compliance costs while the global geopolitical issues can disrupt international business operations.

Government Initiatives

The Government of India has implemented several key initiatives to support the IT and IT-enabled Services (ITeS) sector. In the Union Budget 2024-25, the government allocated ₹1,16,342 crore (about $13.98 billion) for the IT and Telecom sectors. In March 2024, The Cabinet in March 2024 also approved over ₹10,300 crore (around $1.2 billion) for the IndiaAI Mission, which aims to enhance the country’s AI ecosystem.

Future Outlook

India is anticipated to be a leading offshoring destination for IT services globally and the emerging technologies present new opportunities for Indian IT firms.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.