2023 for the Indian IT sector looks good despite a fall in stocks

Over the last year, the Indian IT segment has been shaken, with the stock prices shedding 20-25% due to US and global recession fears. But, these fears could be overblown, and the $235 billion IT industry could well weather this storm.

Nearly 50% of the industry’s revenues come from digital transformation and other related services, especially cloud computing, which has been seeing a phenomenal uptick over the years. Especially during the last two years of the Covid pandemic, cloud computing has seen unprecedented growth as a majority of the IT, and other workforce was working from home, and the demand for remote access to various services was high.

What this means for Indian IT companies is that they will have a significant role to play in this growth story, as nearly 50% of their revenues come from digital transformation and cloud computing.

The Indian IT companies have also partnered with the three biggest cloud platform service providers, which are Amazon (Amazon Web Service – AWS), Microsoft (Azure) and Alphabet (Google Cloud), that command 65% of the global market. They have furthermore recorded their highest growth ever in the September quarter. Amazon’s AWS clocked $20.5 billion – up 33% year on year, Microsoft’s Azure $25.7 billion – up 24% year on year and Google Cloud $6.9 billion – an uptick of 37% year on year.

Indian IT is Still a highly Profitable Industry in the Long Term

The overall cloud computing segment, too, will continue to grow. Valued at $482 billion in 2022, it is expected to reach $1.9 trillion by 2032, growing at a CAGR of 15% over the next decade.

This is an indication that the long-term outlook for the Indian IT industry is bright. The falling rupee against the dollar further helps this. Since the beginning of this year, the Indian rupee has dipped 9.8% and is now hovering above Rs 82 per dollar. This helps improve the bottom lines of Indian IT companies as they can offer their services at competitive prices.

Even domestically, the cloud computing market is growing at a rapid pace. In 2022, the public cloud services market was valued at $4.6 billion, and it is estimated to reach 13.5 billion by 2026, growing at a CAGR of 24%. But some are well within the industry. In the second quarter of this financial year, most Indian IT companies have fallen below expectations in revenue growth.

All the big three of the Indian IT industry – TCS, Infosys and Wipro – have stated that they will go slow with new recruitment this year, which indicates their margins are coming under pressure. The hiring portal, Naukri.com, stated that the growth rate of IT hiring has reduced by 10% in August this year. But these are mere small upheavals for the mega IT industry.