Artificial intelligence (AI) is a major driver, with spending expected to surge 35% this year
NEW DELHI, India (AI Reporter/News): IT spending in India is projected to hit $44 billion (approximately Rs. 3,63,000 crores) in 2024, reflecting an impressive 11% annual growth according to IDC, a market intelligence firm.
This growth is expected to continue, with IT spending, excluding consumer spending, accelerating at a near 10% rate (CAGR) and surpassing $59 billion by 2027. This trend indicates a thriving digital economy in India.
Artificial intelligence (AI) is a major driver, with spending expected to surge 35% this year. Generative AI, a powerful type of AI, is seeing even faster growth, with spending projected to jump 160% and account for a much larger share of the overall AI market by 2027.
IDC research estimates India’s AI market reached $1.7 billion in 2023, and is poised for significant growth in the coming years.
India’s Booming Digital Economy Fueled by IT Spending Surge
IT Spending in India: Shift Towards Software and Cloud
A recent IDC study presented at the India CIO Summit 2024 revealed a significant shift in IT spending priorities.
Here are the key takeaways:
a. Software is King: The software market is poised for explosive growth, with double-digit increases expected for the next three years. This indicates a focus on applications, development, and cloud adoption.
b. Digital Transformation Continues: Despite economic challenges, Indian companies remain committed to digital initiatives. They’re leveraging technology to improve customer experience, launch new offerings, and boost efficiency for better financial results.
c. Strategic Hardware Investments: While device spending dipped in 2023, it’s expected to rebound moderately in 2024. This suggests companies are strategically extending hardware lifecycles while investing in AI-powered PCs for future advancements.
e. Cloud Adoption on the Rise: Investment in Infrastructure-as-a-Service (IaaS) is projected to grow by 16%, highlighting the increasing preference for cloud-based solutions.
f. Focus on Application Development: Spending on application development and deployment is expected to surge by 23%, followed by a 17% increase in application spending itself. This signifies a strong emphasis on building and deploying new applications to drive business goals.
Overall, the study paints a picture of a maturing IT landscape in India, where companies are prioritizing software, cloud, and application development to thrive in the digital age.
India a Leader in AI Adoption
The 2024 India CIO Summit offered valuable insights into the state of AI adoption in India and globally.
Here’s a more detailed look at the key takeaways presented by IDC experts:
India’s Unstoppable Digital Transformation
Vasant Rao, managing director of IDC India and South Asia, underscores India’s unwavering commitment to digital transformation. This dedication is further amplified by the significant increase in AI investments by Indian enterprises. The message is clear: Indian companies recognize AI as a critical driver for future success.
A Phased Approach to Generative AI (GenAI)
Sharath Srinivasamurthy, IDC associate vice president, outlines a two-wave approach for Indian companies to embrace GenAI:
- Wave 1 (2024-25): The initial focus will be on leveraging GenAI to enhance internal productivity across various departments and operations. This could involve tasks like automating report generation or streamlining workflows.
- Wave 2 (2026): Once a solid foundation is established, companies will move towards integrating AI into specific business functions. Imagine AI-powered HR systems that personalize recruitment or AI-driven marketing campaigns that deliver highly targeted messaging.
Beyond 2026
Industry-Specific Applications Emerge: Looking ahead, Srinivasamurthy predicts a significant shift by 2026-27. We’ll see the rise of industry-specific AI use cases. For example, healthcare providers might utilize AI for advanced diagnostics or personalized treatment plans.
Manufacturing companies could leverage AI to optimize production processes and predict equipment maintenance needs. This signals a future where AI isn’t just a productivity tool, but a transformative force across various sectors.
Global ICT Spending Fueled by Innovation
Despite economic uncertainties, Steven Frantzen, IDC’s head of worldwide strategy, anticipates a global surge in ICT spending (Information and communications technology) exceeding 6% in 2024. This growth is attributed to a new era of accelerated digital innovation. Companies worldwide are increasingly investing in automation and GenAI to gain a competitive edge. This trend highlights the global recognition of AI as a key driver for future economic growth.
About Indian Economy
- The economy of India, the world’s fifth-largest by nominal GDP and third-largest by purchasing power parity (PPP), has transitioned from a mixed planned economy to a mixed middle-income developing social market economy. It registered a growth of 8.4% in the third quarter of FY24.
- The GDP per capita is $2,612 (nominal; 2023 est.) and $9,183 (PPP; 2023 est.). The economy is primarily domestic with significant public sector in strategic sectors.
- The GDP by sector is divided into agriculture (18.4%), industry (28.3%), and services (53.3%).
Seven Key Highlights of Indian IT Economy
- Growth: The IT sector contributed 7.4% to India’s GDP in FY22, expected to reach 10% by 20251.
- Revenue: The industry’s revenue touched $227 billion in FY22, a 15.5% YoY growth1.
- Spending: IT spending is projected to reach $44 billion in 2024, growing 11% YoY2.
- AI Investment: AI spending is anticipated to grow 35% this year2.
- Software Market: The software market is forecasted to see double-digit growth in the next three years2.
- Digital Infrastructure: India’s robust Digital Public Infrastructure has transformed the authentication ecosystem3.
- Employment: The IT industry has been a significant employment generator4.
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