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AI to Reshape India IT: Growth Ahead?
22 Aug
Summary
- AI to drive long-term growth in India's IT services industry.
- AI volumes may surpass revenue compression by FY30.
- Generative AI spending to double by 2029.
India's IT services industry is on the cusp of a transformation driven by artificial intelligence (AI), according to a recent report. While the sector currently grapples with macroeconomic headwinds and softer demand for discretionary services, AI is expected to foster new growth avenues over the long term. Projections suggest that by FY30, AI-driven volumes could surpass the revenue compression initially caused by AI-driven productivity gains being passed on to clients.
The report forecasts a mid- to high-single-digit growth for the industry's US-dollar revenue by FY31, spurred by increasing AI-related demand. A notable inflection point for stronger growth is anticipated within the next 18 to 24 months, with FY28 identified as a key year. Currently, there is no indication of major global IT service budget cuts due to AI, and spending on generative AI is expected to escalate.
Estimates indicate that generative AI will constitute 11% of overall IT services spending by 2029, a doubling from current levels. This surge in AI adoption is supported by existing signs of resilience in Indian IT demand, including healthy order-book growth and improved revenue per employee. However, concerns persist regarding rising competition, weaker discretionary spending, and geopolitical uncertainties.
