Chennai: Amidst persistent macroeconomic headwinds, mainly from the US and Europe, the Indian IT sector is expected to see low single digit growth in both FY25 and FY26. The hiring in the sector too is likely to remain subdued. Growth in the US and European markets have moderated over recent quarters due to persistent macroeconomic headwinds. US president Donald Trump’s policies regarding immigration and trade have raised major challenges for the industry. Growth in Europe has been more resilient compared to the US, supported by healthy deal execution in some key segments such as BFSI and healthcare. Both the markets account for 80-90 per cent of the industry’s revenues. According to NASSCOM, the Indian IT sector had seen a growth of 15.5 per cent in FY22 and 8.4 per cent in FY23. Though the growth halved to 3.8 per cent in FY24 from the high base, it would remain within 4-6 per cent in FY25 and FY26, finds ICRA. Of this, IT exports may move up from $214 billion in FY24 to $224 billion in FY25, while domestic revenues are likely to grow from $54 billion to $58 billion. Of the total revenues of $282 billion, the largest segment of IT services valued at $137 billion could grow by 4.3 per cent. Hiring is expected to remain low until the demand outlook improves and may pick up materially only by H2 FY2026. As Gen AI makes rapid inroads, all leading IT services companies are upskilling their employees for tech skills as they explore AI-driven business opportunities. This is likely to lead to an overall moderation in fresh hiring, compared to pre-Covid levels. Attrition levels have tapered significantly to 12.8 per cent in Q3 FY25 from 22.3 per cent in Q3 FY23 as the overall slowdown in growth momentum and strong hiring in the previous fiscal corrected the demand-supply mismatch witnessed earlier. Attrition levels could stabilise at a long-term average of 12-13 per cent over the near term.
Source link
