NEW DELHI: The Indian IT industry enters 2025 with optimism, buoyed by expectations of increased tech spending and a stronger deal pipeline as businesses make bold investments in artificial intelligence. However, the industry's progress will closely depend on global macroeconomic trends and the United States' policies on trade and high-skilled immigration, with President-elect Donald Trump set to take office next month.
The second-quarter results of leading IT companies have sparked hopes of improved client demand in the coming quarters. Industry analysts predict a rebound in growth and profitability by late 2025 or the second half of FY26, provided conditions remain favorable. Tech mergers and acquisitions are also expected to gain momentum throughout the year, driven by interest in big data, cloud computing, and generative AI.
The IPO market, which saw significant activity in 2024, is gearing up for another robust year as numerous tech startups prepare for their debut to capitalize on investor enthusiasm.
Sindhu Gangadharan, chairperson of Nasscom, expressed confidence in a full recovery in tech and discretionary spending by late 2025, contingent on stabilizing global macroeconomic conditions and easing geopolitical tensions. Reflecting on 2024, she noted a steady but uneven recovery in demand for tech services, with strong growth in areas like AI, cloud computing, and cybersecurity. She emphasized that companies are prioritizing investments in these transformative technologies to boost efficiency and resilience.
Gangadharan highlighted that 2025 will likely witness accelerated tech adoption, increased IT budgets, and a recovery in verticals such as BFSI, retail, and healthcare. She stated that cloud migration and AI-driven solutions would play a crucial role in expanding deal pipelines and improving profitability.
Generative AI, which created a significant impact in 2024, has now reached a transformative inflection point, set to redefine industries and drive global innovation. The tech sector is expanding its offerings to include GenAI-powered analytics, intelligent automation, and personalized customer experiences. Meanwhile, non-tech sectors are bracing for disruption, with Generative AI poised to transform marketing, operations, research and development, and other key functions.
Businesses are expected to prioritize investments in cloud migration, AI/ML applications, and cybersecurity as they prepare for resilient and future-ready infrastructures. Companies are also ramping up hiring in areas such as AI, machine learning, generative AI, and cybersecurity, as these technologies become integral to digital transformation strategies.
Puneet Chandok, President of Microsoft India and South Asia, said that robust demand for specialized roles in AI, data science, and cybersecurity within the Indian IT and tech sectors.
He emphasized the importance of upskilling and reskilling the workforce to meet evolving technological demands and predicted a significant rise in opportunities within Tier 2 cities, signaling a more geographically distributed tech talent pool.
Deepak Jotwani, Vice President and Sector Head, Corporate Ratings at ICRA, noted that while revenue contributions from GenAI deals remain limited, they are expected to grow over the medium term as technology adoption becomes more pervasive. He observed some recovery in sectors such as BFSI in recent months, although manufacturing and retail continue to lag behind.
Akhilesh Tuteja, Partner and Head of Clients and Markets at KPMG in India, expressed optimism about the return of discretionary tech spending by late 2025 as global companies stabilize growth and invest in digital capabilities.
For now, management commentary remains cautiously optimistic for the export-driven tech industry, with major players like Infosys and HCLTech raising sales forecasts for FY25. Back home, a stellar year of IPOs has set the stage for numerous startups and digital businesses to join the queue for listings next year, aiming to capitalize on the ongoing market rally.
Following in the footsteps of Swiggy and FirstCry, startups such as Zepto, Bluestone, Ecom Express, PhysicsWallah, InCred Finance, Ola (mobility), PayU, Ather, boAt, Pine Labs, are reportedly eyeing a public issue.
"The (IPO) momentum is likely to sustain given the continued buoyancy in the Indian capital markets," notes Jotwani.
After being in the grip of a harsh and prolonged funding winter, startup space saw some pick-up deal momentum.
"The funding scenario in 2025 is likely to be better than 2024. Investors will be cautiously optimistic and will continue to focus on due diligence, favour sustainable business models and innovation, especially targeting underpenetrated markets," Atul Monga, CEO and co-founder of Basic Home Loan says.
The year logged its fair share of controversies - founders engaged in open and public spats (Ola founder Bhavish Aggarwal Vs comedian Kunal Kamra), faced backlash over their endorsement of long work hours (Infosys founder N R Narayana Murthy, Indian-origin CEO of AI startup Greptile, Daksh Gupta) and became the target of online hate over social media posts on unrealistic workplace expectations.
The tech space presented a picture of contrasts, oscillating between rapid highs and sudden lows.
Quick-commerce companies surged ahead competing for dominance, while the likes of Paytm and Byju's - once poster boys of the Indian startup ecosystem - struggled to navigate challenges on multiple fronts.
As q-comm companies Zepto and Blinkit reshaped consumer habits and redefined the ecommerce landscape, some established players embraced rapid delivery models.
Flipkart forayed into quick commerce with 'Minutes' and Amazon is launching 15-minute deliveries starting in Bengaluru.
2024 saw the tech sector walk the delicate balance between innovation and survival.
Social media platform Koo, which had pitched itself as a rival and viable alternative to Twitter (now X) shut down with co-founders penning a heartfelt note about tough decisions and little yellow bird bidding adieu, and cryptocurrency platform WazirX's became the epicentre of a USD 230 million crypto heist that exposed the fragile nature of tech infrastructure.
Indian startups took on the might of tech world goliaths like Google, who also came under increased scrutiny from the competition watchdog.
Earlier this year, founders of prominent Indian startups called out Google for removing many desi apps from Playstore over disagreements on US tech major's billing policy, and the acrimonious faceoff ended when Google restored the apps back following the Indian Government's intervention.
Competition Commission (CCI) stepped up the heat on big tech firms, including Amazon, Flipkart, Meta, and Apple.
India's antitrust watchdog slapped a penalty of Rs 213.14 crore on social media giant Meta for unfair business ways with respect to WhatsApp privacy policy update done in 2021.
The Commission also issued cease-and-desist directions and directed Meta and WhatsApp to implement certain behavioural remedies within a defined timeline.
"The regulatory developments in 2024 have been encouraging, particularly in how regulators have approached the industry's broader perspective. We anticipate the regulatory landscape in India to become more intense in 2025," Alliance of Digital India Foundation (ADIF) noted.
