Indian IT sector to grow in mid single digit for FY25: ICRA Report

The Indian IT services industry is expected to clock revenue growth in the mid-single digit for the financial year 2024-2025 (FY25), according to a report by Icra for the year.

 

The Indian IT service sector will log growth in the range of 4-6 per cent, slightly better than the low-single digit growth of 3.8 per cent for FY24, the report said.

 

With demand still in the slow lane, the hiring target of the industry is also expected to be in the low range.

 

“Hiring is likely to pick up materially only by the end of H1 FY26,” said the report.

 Icra’s estimates also match the outlook projected by UnearthInsight — a market intelligence firm, which predicts that the industry will clock growth of 5-6 per cent for FY25. For the year, the industry will cross the milestone of $265 billion.

 

UnearthInsights also added that long-term growth is expected to be 7-8 per cent compound annual growth rate (CAGR) till 2030.

 

Continued slow growth in revenue will also impact the hiring pattern of the sector.

 

“While there has been some recovery in Q2 FY25, hiring will remain low in the near term until the growth momentum picks up. The formation of the new government in the US may create some policy uncertainty in the immediate term and thus will remain monitorable,” said the Icra report. 

  Hiring by IT services companies had been at an all-time high in FY22 and H1 FY23, buoyed by strong demand for digital technologies and to combat the surge in attrition levels.

 

Subsequently, moderation in demand coupled with the increase in utilisation of excess capacity added during FY22 and FY23 exerted pressure on hiring by IT services companies through FY24 and Q1 FY25.

 

The tech industries’ total headcount is expected to touch 5.6 million from the FY24 5.4 million. FY25 gross hiring is expected to close at around 0.8 million professionals, with an average attrition of about 12-14 per cent at industry level. Hiring, according to UnearthInsights, has been fueled by demand from global capacity centres (GCC).

 

The report stated that the 1,780 GCCs in India will close at a revenue of $75 billion, and employee count at 2 million for FY25, which has grown fastest in the last three years.

  Generative artificial intelligence (gen AI), the big focus of the tech world, continues to be a small revenue generator. According to the report, GenAI, as a service, generates around $5 million to $10 million in revenue per project as only one third of Fortune 2000 firms have modernised their ERP platforms and less than 10 per cent have mature data.