BENGALURU: Hiring activity in the IT industry has been muted over the past five quarters due to subdued demand prospects and ICRA expects it to remain muted in the near term with gradual pick-up until the growth momentum improves.
Deepak Jotwani, assistant vice-President & sector head, ICRA, said, “Attrition levels are expected to stabilise over the near term, inching closer to the long-term average of 12-13%, as overall slowdown in growth momentum and strong hiring in the previous fiscal has corrected the demand-supply mismatch witnessed earlier.”
It forecasts the revenue growth of the Indian IT services industry to improve mildly from 2% in 9M FY24, but remain modest at 3-5% in FY25.
Jotwani added that ICRA expects revenue growth (for its sample set companies) in FY25 to remain tepid at 3-5% for the second consecutive year, given persistent macro-economic headwinds in key markets of the US and Europe, resulting in lower discretionary IT spends by corporates. The impact is broad-based across all key sectors serviced by the industry.”
However, banking, financial services and insurance (BFSI) and telecom segments have contracted over others. Nonetheless, critical spending and cost optimisation deals continue to gain traction, supporting growth prospects for IT services firms to some extent, he added.
In 9M FY24, in US$ terms, ICRA’s sample set companies recorded a modest year-over-year (YoY) growth of about 2.0% in revenues, against 9.2% in FY23. In terms of geography-wise trends, growth in the US saw a sharp moderation compared to that in Europe.