Tech sector registers highest growth in 11 years, revenues set to top $200 bn in FY22

The Indian technology industry is set to cross the $200 billion revenue mark in FY22, touching an estimated $227 billion in revenues in the current fiscal year on the back of ‘accelerated global tech spending,’ according to the Nasscom strategic review released on Tuesday.

This translates into a year-on-year growth rate of 15.5%, the highest ever growth since 2011, aided largely by a strong performance recorded across all segments. Revenues worth $30 billion are expected to get added in FY22. “The industry has added $100 billion in ten years; the first $100 billion took 30 years,” said Debjani Ghosh, president, Nasscom at a virtual media conference.

Exports (including hardware) are estimated to record a year-on-year growth of 17.2% in FY22, touching revenues of $178 billion. This essentially translates into more than 51% share of India’s total services exports. Domestic technology industry revenues are expected to near $50 billion during the year, notching a 1.2 times growth over the pre-Covid levels (FY2019) as more local enterprises earmarked a higher share of funds for building tech capabilities. As much as 70% of Indian firms have increased their technology budgets in 2021.

Domestic tech revenues stood at $44.5 billion in FY21. The e-commerce segment is set to register a year-on-year growth of 39% to reach $79 billion during FY22. Digital now contributes about 30-32% to the total industry revenues. Nearly 66% of deals signed by tech firms this fiscal year were largely digital.

“The industry also undertook over 290 M&As with their primary focus as digital,” Nasscom said.

As the pandemic upended regular norms of conducting business, corporates across segments turned to digital offerings to keep operations intact. While going digital was initially about supporting daily operations, over time, it has become central to overall business strategies. Firms are adopting newage tech capabilities like artificial intelligence (AI), machine learning (ML), robotics and cloud computing to become more efficient and improve customer experience.

Analysts estimate digital transformation and cloud spends to double over the next five years. A recent survey conducted by Nasscom showed that about 70% CXOs expect FY23 to be another “growth year driven by digital demand.” Nearly 60% of the industry’s clients are expected to spend up to 6%-8% of their revenues on technology. Sectors like healthcare, BFSI, manufacturing and retail are expected to lead the tech spends. Cloud, cybersecurity, data and AI will be the top tech priority areas for the industry for solution development.

“Cloud adoption continues to accelerate; a three times rise in cyber risks is driving increased cybersecurity deals,” revealed the survey.

The industry recorded nearly 10% estimated growth in direct employee pool in FY22 with a highest-ever net addition of approximately 450,000 to its employee base. The sector also reskilled approximately 280,000 employees in the year.

“With 1 out of 3 employees already digitally skilled, the digital tech talent pool is at 1.6 million, growing at a CAGR of 25%,” the industry body said while adding that the India tech talent demand-supply gap stands at 21.1%, ‘lowest in the world.’

“A lot of the companies are now moving towards hiring fresh graduates in order to bridge the gap. That’s becoming a key strategy across the industry. In order for that to work, we have to work with the academia, with the universities to ensure that we bridge the gap between the skills that are there and the skills that we need,” Ghosh said.