The IT & BPM sector in India: A powerhouse of growth and transformation

Over the past two decades, India has developed as a worldwide IT centre. Information technology has played a vital role in expanding the Indian economy. 

The Indian IT industry continually expands its digital capabilities by embracing deep tech technologies and emphasising the adoption of cutting-edge technologies such as artificial intelligence, cybersecurity, and the IoT (Internet of Things). 

The IT & BPM industry has emerged as one of the most critical growth engines for the Indian economy, significantly boosting the nation’s GDP and public welfare. The IT sector contributed 7.4% of India’s GDP in FY22 and is predicted to contribute 10% by 2025.

Today’s article will discuss the evolution of the IT sector in India, along with its current market scenario and prospects for the future. We will also look at the top IT stocks in the end to give you a clear picture of the investment scope in the industry. Let’s begin.

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Understanding the IT sector in India

Information technology is an industry that deals with computers, including software, hardware, telecommunications, and any other technology related to data transmission. Apart from that, internet services, digital content creation, e-commerce, and IT consulting are all part of this industry. 

India has one of the fastest rates of digital usage and offers one of the lowest data charges in the world, at ₹10/GB ($0.12/GB). This achievement happened via a mix of government actions, business investment and development, and digital applications that positively impact people’s daily lives.

The Indian government has launched many necessary measures, including the Digital India Programme in 2015 to develop India’s IT industry. In India, both the national and state governments have taken initiatives to build technological solutions to improve citizen services digitally. 

In the financial year 2023, India’s IT & BPM sector was projected to employ about 5.4 million people. The types of jobs in the IT sector in India that are highest paying are computer programmer, web developer, computer hardware engineer, and prominent data engineer, to name a few.

Evolution of India’s IT sector

India’s information technology sector was founded in the 1960s. Tata Consultancy Services was one of the first IT companies in India, founded in 1968. Indian IT had many challenges back in the 1970s. In the 1980s, the Indian government started measures and programmes to support the development of a strong IT sector in India after seeing its potential. 

1984 would be the turning point for this industry in terms of improvements. This is when India witnessed the first surge of IT entrepreneurship. During this period, several IT companies were founded, including Wipro Information Technology Ltd., NIIT, Infosys, and others. 

The first IT firms that were founded in India laid the groundwork for future development. However, the economy was state-run at that time and had not been opened up. Back then, bank financing was not available to exporters as the software industry was not recognised that well in the country. 

Even the state’s opposition to this sector was evident in the hefty import tariffs. In 1984, the government issued the New Computer Policy (NCP-1984), which lowered import duties on software and hardware.

In addition, software exports were finally acknowledged as a “delicensed industry.” This implied that the business was no longer bound by the Licence Raj (strict government control over the Indian economy from the 1950s to the 1990s) and that exporters were now qualified for financing from banks. The Indian IT sector finally became what it is today because of these regulations.

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Today’s IT market in India

The National Association of Software and Service Companies (NASSCOM) reports that the Indian IT sector generated US$ 227 billion in revenue in FY22, a YoY rise of 15.5%. It was expected to reach US$ 245 billion in FY23.

With a valuation of US$ 13.87 billion in 2022, the Indian domestic market for business services and information technology grew by 7.4% YoY in 2022, compared to 7.2% in 2021.

By 2025, the Indian software product market will grow to $100 billion. The primary goal of Indian corporations is to develop their worldwide delivery centres and broaden their global presence through foreign investment.

The computer software and hardware industries drew the most significant FDI equity investment in FY 2021-2022. A $95.88 billion FDI equity infusion was received between April 2000 and June 2023. 

Future of the IT sector in India

IT businesses worldwide choose India as their primary off-shore location. Emerging technologies are opening up a whole new range of options for leading IT businesses in India, which have already shown their ability to provide on-shore and off-shore services to customers worldwide.

In 2025, the Indian IT and business services sector will reach US$ 19.93 billion. In 2023, it was estimated that India would allocate US$ 144 billion to IT. Widespread cloud use can potentially boost India’s GDP by US$380 billion and create jobs for 14 million people by 2026.

India’s software services sector is competitive and has room for expansion and innovation, as seen by its steady export increase as well. 

The main growth areas for the IT sector in 2023 were artificial intelligence, cloud computing, cybersecurity, and digital transformation. These technologies are becoming increasingly important for companies of all sizes, and the Indian IT industry is prepared to help customers implement and benefit from these innovative solutions. 

The Indian market offers excellent opportunities since the government has enhanced its IT infrastructure. Undoubtedly, the Indian IT sector is well-positioned to expand in the near future.

Top IT sector companies in India

Here is a list of the top IT sector stocks in India on BSE ranked by market capitalisation (as of December 13, 2023)

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Conclusion

Over the last several decades, the growth of India as a financial power has been fueled by the country’s IT sector. Remarkably, the industry has significantly contributed to the economy, the creation of jobs, and export revenue. As long as India keeps investing in R&D and embracing innovative technology, the sector’s prospects are promising.