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Despite economic slowdown in mature markets such as the US and the EU that tend to sacrifice tech spend, green shoots are visible in parts of the $24,500-billion Indian IT industry is witnessing some green shoots, said the newly-appointed chairperson of IT industry body Nasscom Rajesh Nambiar. “Clearly there is a bit of a slowdown in discretionary spending from the customers of all our organisations,” Nambiar told The Economic Times in an interview while holding up indications of resilience for the sector that has changed the perception of brand India in the global stage in the past few decades.

Incidentally, only last week the Reserve Bank of India has come up with figures that can only spread cheer in the IT industry. It found out that in FY23, the listed IT companies in India turned out to be the highest foreign exchange earner in the country for the first time, edging out the traditional first boy oil and petrochem sector. Moreover, a few analysts thought that the trend might continue in FY24 too.

On the positive side, Nambiar pointed out, the number of global capability centres (GCC) in India has expanded. Healthy growth trends are also visible in business process management and engineering, research and development.

Nambiar said robust deals are being worked out in the April-June quarter. Moreover, the rush among companies to extract gains from Generative Artificial Intelligence (GenAI) offer great potential for the Indian industry. These developments brighten the scenario at a time when the picture could have been gloomier otherwise. Nambiar, who is the chairman and managing director of Cognizant India, thinks that it might take a few more quarters before the industry enters a “renewed growth phase”.

While highlighting the potential of the expanding GenAI sector, the NASSCOM chief said, Indian companies need a lot of high-quality and ready-to-use training datasets, which are rather in short supply at the moment. He said that government support will be crucial in realising the Indian companies exploiting the full potential of the “GenAI revolution”. There are more than 60 active GenAI startups in the country now. He said that NASSCOM is already in dialogue with the government to formulate appropriate framework and guidelines to boost the potential of the Indian companies in this emerging sector.

Turning his attention to the employment scenario, Nambiar said that more than 332,000 tech jobs were posted in the April-June quarter. However, the number did not indicate a lot of recruitment are the fresher level. He added that Nasscom member companies “are really focusing on enhancing utilisation. There is a shift to a more just-in-time hiring model which is not a very conducive model for the campus hires,” “he explained.

The NASSCOM chief emphasised that a fine balance must be struck between user privacy, data protection and disinformation and nurturing innovation. The Digital Personal Data Protection Act is an appropriate way of putting the “guardrails in place”, he said, adding that framing AI regulations demands a lot of time and understanding.

Nambiar also explained the decline in the number of small deals while big ones took place. “The large deals are predominantly areas where clients are looking at cost efficiency, economies of scale. That’s why suddenly growth momentum in small deals have dried down because discretionary spends have gone away. But large deals will hopefully make up for decline in small deals over a period of time but (large deals) don’t translate into quarterly revenues for many of the companies,” he said.
Small deals were taking place only in a few areas such as AI, cloud and cybersecurity, he claimed.