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Indian IT industry to grow by 2.3% in FY21 despite contraction in tech spends: Nasscom

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The industry remained a net hirer in the fiscal year, which saw a major hit across the world because of the COVID-19 pandemic, with 1.38 lakh new jobs added to take overall employment to 44.7 lakh, Nasscom said.

The Indian IT sector is set to grow at 2.3 percent in the current fiscal to touch revenues of $194 billion, as per Nasscom's report on 'Technology Industry Performance FY21 And FY22 Trends'.
The growth was slowed due to the pandemic, with the industry seeing negative revenue growth in the first quarter of the fiscal.
In comparison, the IT sector grew at 7.7 percent in FY20 and 6 percent in Fy19.
However, Nasscom President Debjani Ghosh that the fact that the industry reported a growth of over 2 percent despite the pandemic showed its resilience.
“We were looking at a 6-7 percent decline halfway through the pandemic given the global shutdown and sharp decline in global GDP. In that scenario, for the Indian tech industry to bounce back with a 2.3 percent growth is phenomenal. We are the only sector to call out a growth in 2020,” Ghosh said.
GROWTH DURING PANDEMIC
Breaking up the sector revenue growth, IT services are set to grow at 2.7 percent to touch $99 Bn, the BPM sector to grow by 2.3 percent to $38 Bn, E-commerce (retail + etravel) By 4.8 percent(Etail grew 82 percent, eTravel degrew 75 percent), while Hardware revenues are set to show the highest growth at 4.1 percent to touch $16 BN, mainly due to investment in WFH. The Engineering R&D space was the only one set to degrow by 0.2 percent during the fiscal.
Digital revenues are now set to touch 28-30 percent of overall revenue, having grown steadily over recent years and accelerated by the digital spends during the pandemic.
The domestic market is seen to grow 1.8 times of exports this year, with the latter seeing a marginal growth of 1.9 percent to touch $150 billion.
PUSH FOR WFH
The domestic growth was driven by the demand for Work From Home hardware, Ghosh said.
“A large part of domestic growth was driven by demand for hardware. Hybrid models are becoming a reality and remote work will not go away,” Ghosh added.
She also added that Nasscom is urgently seeking clarity from the government when it comes to issues around taxes for allowing IT companies to enable work-from-home for a long term basis even at SEZs.
“SEZs had given the IT industry work-from-home extensions till end of March and we urgently need clarity on what happens after that. We are hoping to hear from the government ion a few weeks,” she added.
OPTIMISTIC FORECAST
The IT sector is hoping to ride on the tailwinds seen in the second half of 2020 ($15 BN in deal pipeline and 5.3 percent revenue growth) to have a stronger FY22, with a survey of over 100 CEOs done by Nasscom, between January and February 2021, painting an optimistic picture.
The survey showed that 97 percent CEOs expect global economic growth to be better than 2020, 71 percent CEOs expect global tech spend to be significantly higher than 2020, 67 percent CEOs expect Indian tech industry to grow significantly higher than 2020, 95 percent CEOs expect 2021 hiring to be more, an d 60 percent CEOs expect larger digitisation deals.
“The Nasscom CEO survey has never got such positive response,” Ghosh said.

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