Tech spending in India to grow by 9.6% in 2023

Technology spending in India is expected to grow by 9.6% this year, driven by public sector digital initiatives as well as investments in tech outsourcing, hardware maintenance and telecoms, according to a new report by Forrester.

In its India tech market outlook for 2023 and 2024 report, the analyst firm noted that growth in IT spending in the subcontinent is set to return to pre-pandemic levels this year with growth expected to be even better next year.

Spending by the Indian government on digital initiatives in areas spanning agriculture, education and artificial intelligence (AI) is expected to spur adoption of technologies such as cloud computing and analytics.

In agriculture, for example, the Indian government is planning to build a digital infrastructure for agriculture that will provide Indian farmers with access to market intelligence and support the growth of the agritech industry, among other goals.

The Reserve Bank of India, the country’s central bank, is also driving developments in digital payments, digital commerce and digital currencies, which will not only shape the future of retail and banking in India, but also enable smaller merchants to compete with large online retailers.

India’s private sector is also expected to contribute to the country’s overall IT spending, particularly in technology outsourcing and hardware maintenance, both of which will see sharp growth.

“Indian companies are moving from a 100%-owned IT model to a project-based outsourced model as new technologies capture the imagination of consumers and businesses. Indian tech leaders no longer want to own, build, maintain, and run products on new technologies completely by themselves,” the report noted.

Forrester noted that this is because Indian companies, without in-house capabilities, have been unable to keep up with fast-evolving technologies, driving them to look for partners to avoid hiring a large workforce and saddling themselves with “non-performing technology assets”.

Another area that will see major investments in India is telecoms. The world’s second largest mobile market is expected to ride on its rapid migration to 4G and fast-growing adoption of smartphones to spur 5G adoption.

According to a study by Ericsson last year, 39% of mobile subscriptions in India are expected to be of the 5G variety by 2027, even as the technology’s full potential lies in the enterprise segment which will generate some $17bn worth of incremental revenue for Indian telcos by 2030.

The blip in India’s technology spending this year is in software, tech consulting and systems integration. Growth in software spending will decline from 15% in 2022 to 14.5% in 2023 while that of tech consulting and systems integration will dip slightly from 11% in 2022 to 10.2% in 2023.

India’s largest IT services firms Tata Consultancy Services and Infosys have reported slower growth in recent months as their clients defer spending amid recession fears.