The state of the Indian IT industry April 2025

Published: 4/23/2025

The state of the Indian IT industry

I have been following the news flow for the Indian IT industry, and these have been my observations to date.

The main/big IT enablers (places that require a lot of tech skills for their business) in India are

1) Software services industry (Think Infosys, TCS, HCL Tech, Wipro) – They get outsourced work from clients outside the country due to the low cost of production (low wages to workers) advantage.

2) Indian Startups – They are new businesses trying to capitalise (make money) on the offline-to-online transition. They use technology as a competitive advantage (higher reach, offering convenience) or as cost reducers (automation, increased efficiency using AI).

Now for Indian software industry scenes, you get the majority of your money primarily from US and UK markets. Either you have your big client there or your source of funding (VC funds), but in either case, your money is tied to how much money is up for IT spends/investments in these countries. So watching these markets for spending patterns (will they spend more or less?) is important if you are trying to build something using technology in India.

The current situation in the world is that the majority of countries/markets have less discretionary spending (money available to spend other than your core activity), and hence you get to see less IT spending for the Indian services industry as well as less VC funding happening in India. Due to less spending from these big markets, you get to see cost-cutting measures and price hikes of IT services in India. This behaviour also encourages spending on automating business processes, provided they reduce costs, and this is the reason why you get to hear AI a lot these days.

In the recent earnings call, the HCL Tech management highlighted that the “AI as a cost reducer” theme is what they see working out this year, meaning the clients of these services in the industry are looking to incorporate AI into their business so as to reduce costs in their expenditure. This puts a ceiling on how much money India's services industry can charge from their clients, provided the cost to transition to AI-enabled systems comes out to be less than the existing systems in place. So I see little growth in the Indian IT services industry this year.

Coming to the Indian startup scenario, with the tight funding environment, we are seeing drastic cost-cutting, price hikes and the race to go IPO to raise urgent survival funds or give exits to previous investors. Hence, showing increased profitability and a positive outlook is of utmost importance for the players, and this is why you see less hiring, moving towards AI to cut costs and every big-name start-up going for stock market listings. As a job seeker in a start-up, the growth in salary should be stagnated at best, while increased spending would only be in a field like AI because of its in-demand nature right now. I expect this demand for AI skills to decrease as more and more businesses automate their low-hanging fruits till the time of raising fresh funds.

So as a job seeker, the only domain in the near future to target to get a good salary hike is AI, but expect this growth in salary to drop as more and more business processes get automated and there is less demand to automate further processes. As an IT service business owner or agency owner, if you can offer AI services along with your existing server, then you can see one domain of revenue growth but still with an upper ceiling. Expect this reduced spending behaviour till there is increased spending from US and UK markets, and when these markets have increased their spending, look for the trend in interest rates (going lower is good) and government spending happening (more spending is good) in these markets.

I hope you would have learnt something new from this week’s blog. See you guys in the next one. :)