Will Indian IT industry sustain its growth momentum?
The contribution of IT sector in India's GDP rose from 1.2% in 1998 to 10% in 2019. It has made its presence felt globally too. Here's a report on the Indian IT sector and the road ahead for it
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On January 16th, Union Commerce and Industry Minister Piyush Goyal said that India’s IT industry can play a big role in raising services exports to $1 trillion a year.
In a virtual meeting with a clutch of top leaders from the IT industry, the Union minister assured the government’s full support to the sector. The assurance, which came just days before the Union budget, was a confidence-booster for the sector.
And amid strong Q3 performances, the Indian IT sector got another shot in the arm this week. Six Indian IT companies found themselves in the top 25 list of most valuable global IT services brands.
TCS’ growth is attributed to the company’s investments in its brand and its employees, customer equity, and strong financial performance.
Tata Consultancy Services or TCS has become the world’s second most valuable brand in the IT services sector, according to Brand Finance’s recent Global 500 IT Services Ranking report. On the top of the list was Accenture.
TCS grew its brand value by $1.84 billion (12.5%) to $16.78 billion in just over the last 12 months. Infosys came in at third rank with a brand valuation of $12.77 bn. And apart from the two giants, four more Indian companies feature in the top 25 IT services brands
The average growth of Indian brands that have appeared in the Brand Finance IT Services ranking since 2020 is an impressive 51 per cent. The US brands have on average contracted by 7 per cent.
Both TCS and Infosys reported a healthy quarter-on-quarter rise in their consolidated net profit in the quarter ending December 2021. While TCS saw its net profit increase 1.51% to Rs 9,769 crore, Infosys saw its net profit increase by 12% to Rs 5,809 crore.
And the top 5 Indian IT companies, namely TCS, Infosys, Wipro, HCL Technologies and Tech Mahindra are expected to report around $70 bn as combined revenue in the ongoing fiscal year.
The pandemic has dealt a big blow to India’s unorganised sector. But it helped several organised sectors register a good growth. Over the last two years, Indian IT companies reaped rich dividends as the world underwent digital transformation at a frantic pace.
India’s $194-billion IT industry has been a big beneficiary from the pandemic. It spurred global companies to bolster investments in services, ranging from cloud-computing, digital payment infrastructure to cyber-security.
In fact, industry body NASSCOM has recently pointed out that before the pandemic, Indian IT companies were reporting annual growth rates of around 6-7%, which have now increased to around 15-20%.
However, the industry’s growth has brought with it an increased scale of attrition. Indian IT majors and newer tech start-ups flush with venture capital money are competing for the same talent pool. And as evidenced by payments startup BharatPe luring techies with the promise of BMW bikes and paid holidays to Dubai, the entry of these VC-backed startups is driving up the industry’s compensation metrics, leading to higher attrition rates, which for most companies including TCS, hovers around 15-16% today.
Even as Indian IT services players keep pace with their global peers, they need to be ready to adapt to a volatile market, where change is the only constant. Another question that remains open is what will happen to the industry's momentum if and when the rapid pace of digital adoption driven by COVID-19 settles down.
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First Published: Jan 28 2022 | 8:15 AM IST
