The Indian IT services sector is anticipated to achieve revenue growth in the mid-single digits for the financial year 2024-2025 (FY25), as indicated by a report from Icra.
According to the report, the sector is projected to experience growth between 4 and 6 percent, which is an improvement over the low-single digit growth of 3.8 percent recorded for FY24.
Given the current sluggish demand, the industry’s hiring targets are also expected to remain modest.
The report states, “Hiring is likely to pick up materially only by the end of H1 FY26.”
Icra’s projections align with those of UnearthInsight, a market intelligence firm, which forecasts a growth rate of 5-6 percent for FY25. The industry is expected to surpass the $265 billion mark during this period.
UnearthInsight further noted that long-term growth is projected to reach a compound annual growth rate (CAGR) of 7-8 percent through 2030.
Continued sluggish revenue growth will also influence the hiring trends within the sector.
“Although there has been some recovery in the second quarter of FY25, hiring is expected to remain subdued in the short term until growth momentum accelerates. The establishment of a new government in the United States may introduce some policy uncertainties in the immediate future, which will require close monitoring,” stated the Icra report.
Hiring levels among IT services companies reached unprecedented heights in FY22 and the first half of FY23, driven by robust demand for digital technologies and the need to address rising attrition rates.
However, a subsequent decline in demand, combined with the increased utilization of surplus capacity that was added during FY22 and FY23, has placed pressure on hiring within IT services companies throughout FY24 and the first quarter of FY25.
The total workforce in the technology sector is projected to rise to 5.6 million, up from 5.4 million in FY24. Gross hiring for FY25 is anticipated to reach approximately 0.8 million professionals, with an average attrition rate of around 12-14 percent across the industry. According to UnearthInsights, hiring has been driven by demand from global capacity centers (GCC).
The report indicated that the 1,780 GCCs in India are expected to generate $75 billion in revenue and employ 2 million individuals by FY25, marking the fastest growth in the past three years.
Generative artificial intelligence (GenAI), a major focus in the technology sector, remains a minor contributor to revenue. The report notes that GenAI as a service generates between $5 million and $10 million per project, as only one-third of Fortune 2000 companies have modernized their ERP systems, and fewer than 10 percent possess mature data capabilities.
