Transformation of Indian IT industry post-pandemic: How can the government sustain its...

Transformation of Indian IT industry post-pandemic: How can the government sustain its growth in the long run?


In the wake of the pandemic, the various national and state lockdowns the Indian economy has undergone since March 2020 have had our economy reeling under tremendous pressure. Even now, the threat of the impending third wave is keeping everyone on tenterhooks. But just like our Prime Minister, Shri Narendra Modi, mentioned as early as June 2020 that new opportunities arise in the time of crisis, some sectors have experienced growth in the period benefitting from the demands generated by and during the crisis.

Leading the economic recovery in India is the IT industry. As per a NASSCOM report, the Indian technology industry (excluding e-commerce) is expected to touch $194 billion in 2021, thereby registering a positive growth of 2.3% over the previous year. The pertinent data to note here is that riding high on increased digital adoption and acceptance by industries and consumers alike, the domestic sector of the industry is likely to touch $45 billion with a y-o-y growth of 3.4% as against a 1.9% growth in the export sector. This resilience shown by the industry giants, MSMEs, and start-ups during the pandemic can be attributed to the accelerated pace of digital transformation and a successful hybrid work model.

Digital technologies have fuelled innovation in banking and financial services, supply chain and logistics, retail, and even in traditionally digitally reticent sectors like healthcare and manufacturing, responding to the need for contactless and remote products and services. The use of AI, Machine Learning, and cloud computing to meet the pandemic fuelled demand is exemplary. The IT sector contributes 7.7% of our GDP. The MSME sector, which is undergoing a digital transformation, contributes a third of our GDP, and growth of this sector is imperative to achieve our target of being a five trillion-dollar economy.

From an agriculture-first economy, we have leapfrogged into the digital industrial revolution, with IT driving the growth of the economy. With a billion-plus population and a diverse landscape, our problems are unique and unprecedented, and the solutions must be likewise. A case in point is our vaccination program – it was a challenge not just to vaccinate people across the country but also to identify eligible citizens and maintain their records. Our IT industry responded with the Cowin platform – an idea that has elicited interest from over 76 countries. The JAM trinity, UPI payments, and India Stack open APIs also underline how crucial digital infrastructure is for every sector of our economy. When licensed as products for the world markets, these solutions will further bolster our industry’s credentials as an innovation hub.

Crisil expects the IT industry to lead a strong recovery with an 11% growth in revenue in 2021-22. Increased investments are expected to come in from large companies, MSMEs, and governments at all levels. While the potential is immense, the challenges are even bigger, and the government interventions and sustained drives will be crucial in overcoming them. For example, as the IT skill gap is a huge issue, Skill India training programs in AI, automation, and data sciences are necessary to meet this demand. The taxation and compliance frameworks have been simplified for the ease of doing business, but they are nowhere close to the global levels. Access to cheap mobile data and high smartphone penetration has put us in a unique position with a vast amount of diverse data. Increased government spending in maintaining this data in a structured manner and training our workforce in AI, blockchain, and data sciences can help us develop scalable solutions to complex problems. This also calls for more significant investment in cybersecurity infrastructure and effective regulation. The government should facilitate multi-sector collaboration between research organizations, government agencies, industry experts, and businesses – of the kind we have seen in healthcare recently, to develop an RNA extraction kit for Covid testing. It was created by a research institution, commercialized by a diagnostics major, and received rapid regulatory approval by the government.

Further, the cost of debt for the industry is exceptionally high and a massive hindrance in securing global projects. Government-provided access to quicker and cheaper credit can make us more competitive in international markets. Also, incentivizing investment in IT hardware manufacturing units could localize our supply chains and bolster our growth.

In conclusion, the IT industry is at a tipping point where the suitable impetus matrix from the government can help realize India’s potential and make it a global leader in IT innovation.

(By: Mr. Sandeep Sekhar, Chairman & Global CEO, C Ahead Digital)