Indian IT industry forecasts moderate growth in FY2024
NEW DELHI, INDIA — The Indian IT industry is projected to witness a notable slowdown in revenue growth in fiscal year 2024.
Leading credit ratings agency ICRA forecasts the sector will expand at a moderate pace of 3-5% in FY2024, marking a significant decline from the robust 9.2% growth recorded in FY2023.
The analysis highlights that discretionary IT spending across major sectors like banking, financial services, and insurance (BFSI), retail, technology, and communications will likely taper amidst challenging macroeconomic conditions globally.
Key verticals like BFSI face specific headwinds hampering demand, including softness in areas like mortgage lending and investment banking.
One major consequence is an expected 70-100 basis points contraction in operating margins during FY2024 due to lower operating leverage. However, profitability levels are still expected to remain largely healthy at 20-21%.
Hiring by top IT services firms has already significantly reduced over the past three quarters due to the demand slowdown. ICRA expects subdued recruitment activity to continue in the near future, given projections of a protracted growth deceleration.
Furthermore, attrition rates should moderate further with easing supply pressures before stabilizing at 13-15%.
Nevertheless, ICRA’s analysis underlines the sector’s robust financial position and liquidity buffers, including strong cash flows, efficient working capital management, and limited capex needs. This financial profile lends stability to the credit outlook.
Overall, while near-term headwinds are anticipated due to the uncertain global economy, the Indian IT industry’s strong competitive strengths and cash-rich position provide the capacity to ride through the challenges.
