- The current state of the Indian economy
- Major government initiatives towards digitizing India
- Is India poised to become the next global technology hub?
- Challenges that need to be addressed
- India’s growth outlook for 2024: positive trends and promising future
All has not been well with the world economy in recent years. The third decade of the 21st century, witnessed the world economies being hit by the COVID-19 pandemic. Even as the countries were still grappling with the pandemic’s adverse economic impact, the Russian-Ukraine conflict further added to the miseries. The final and most recent hit came as the appreciation of the US dollar that led to various currencies of the world falling against it. It also led to the widening of the current account deficits.
The above incidents have had a profound impact on the world economy’s growth. The result? Economic slowdown, inflation, recession, monetary tightening, and more.
Despite efforts to contain the situation, the road to recovery seems long and uncertain.
However, amidst the fall of the world economies, India seems to be forging its own path of growth and innovation.
The Indian economy managed to stage a remarkable recovery after its encounter with the pandemic. Despite the huge population of the country, India outpaced many other nations in terms of controlling the situation and vaccinating the population. In terms of the economy too, India has ascended to the pre-pandemic growth levels in FY23.
The current state of the Indian economy
The Indian economy has shown unbelievable resilience in the face of the pandemic and thus recorded a grand recovery in FY22. The positive outlook for the Indian economy continues to be echoed by experts worldwide. According to a top UN economist, India is currently a “bright spot” in the world economy and is on a “strong footing”, projected to grow at a rate of 6.7% in the coming year. This growth rate is considerably higher than that of other G20 member countries.
Source: PiB India
If we look at the global downsizing happening in some of the leading tech companies of the world, Indian companies have taken a different approach here as well.
Indian companies have also been quick to adopt remote working and other measures to ensure business continuity. This has allowed Indian companies to continue operating and even expand their operations in some cases. Also, the support from the government through tax reliefs has allowed companies to stay afloat and not downsize as aggressively as other tech companies.
However, due to the economic unrest in the rest of the world, India too had to contend with various challenges as explained before, including the reining in inflation which was accentuated by the European strife. Another challenge that remains is the depreciating rupee – especially with the possibility of further rate increases by the US Fed.
The government’s push towards digitization and other structural reforms has created a more business-friendly environment and attracted investment. The country’s strong domestic demand, driven by a young and growing population, has also been a significant contributor to economic growth.
The Impact of Cloud Computing and AI on India’s global growth
The IT-BPM (Information Technology and Business Process Management) sector has been one of the key drivers of India’s economic growth. According to the National Association of Software and Service Companies (NASSCOM), the IT-BPM sector’s contribution to India’s GDP (Gross Domestic Product) was around 8% in the fiscal year 2020-21.
Technologies like Cloud Computing and Artificial Intelligence (AI) have played a significant role in shaping India’s economy and projecting it as a tech superpower on the global stage. India’s thriving tech industry, supported by a large pool of skilled IT professionals, has made it a hub for innovation and technology services.
Let’s read in-depth about the state of cloud computing and other advanced technologies in India.
India’s Cloud computing market
The overall India public cloud services market is expected to reach $13.0 billion by 2026, growing at a CAGR of 23.1% for 2021-26, according to research firm IDC. The revenue totaled $2.8 billion for the first half of 2022.
India is an important growth market for cloud service providers, and many of them have been expanding their presence in the country in recent years. This is because India has a rapidly growing digital economy, with an increasing number of businesses and individuals adopting cloud-based services to improve their productivity and efficiency.
To cater to this growing demand, cloud computing service providers are investing in new data centers and cloud regions in India. These facilities allow them to provide faster, more reliable, and more secure cloud services to their customers in the region. By having a local presence, these providers can also comply with local data privacy and security regulations, which is important for building trust with their customers.
Some examples of cloud service providers that have recently expanded their presence in India include Amazon Web Services (AWS), Microsoft Azure, Google Cloud, and Alibaba Cloud. These companies have opened new data centers or cloud regions in major Indian cities such as Mumbai, Chennai, and Hyderabad, among others. This expansion is expected to continue in the coming years, as cloud adoption in India shows no signs of slowing down.
India’s AI and other advanced technologies market
IDC predicts that the India AI software market will grow from USD 2,767.5 million in 2020 to USD 6,358.8 million in 2025, at a CAGR of 18.1%.
TRAI Chairman, PD Vaghela, highlighted the importance of embracing new technologies and being prepared for technology disruptions during his speech at the India Digital Summit. He emphasized that the future of India’s economy and society depends on its ability to leverage new technologies such as AI, ML, IoT, and 5G to drive innovation and growth.
The recently hosted Digital Experience Centre by the National eGovernance Division (NeGD) under the Ministry of Electronics and Information Technology (MeitY) in Lucknow, Uttar Pradesh, is a great example to understand India’s advancements in the field of Artificial Intelligence (AI).
#IndiaTechade dream would be realised on the strength of its innovators- PMThe Digital Experience Centre at the #G20DEWG Meet in Lucknow showcased the limitless possibilities in #AI for both innovators & users. #G20India @g20org @AshwiniVaishnaw @Rajeev_GoI @amitabhk87 pic.twitter.com/dJ13JlieoI — Digital India (@_DigitalIndia) February 22, 2023
India has a large pool of talented software engineers, data scientists, and researchers who are working on developing innovative AI applications and solutions.
The AI startup ecosystem in India is also thriving, with several startups working on developing cutting-edge AI solutions across a range of industries such as healthcare, finance, e-commerce, and agriculture. These startups have received significant investments from both domestic and international investors, indicating the growing interest in India’s AI industry. Some examples include Haptik, Gupshup, Uniphore, and Verloop.
Major government initiatives toward digitizing India
While talking about India’s growth in the technology field, the role of government initiatives cannot be overlooked.
Over the last decade, India has witnessed several schemes and initiatives by the government of India to support Indian businesses – including startups. Some of them have been listed below.
- Aatmanirbhar Bharat App Innovation Challenge: A unique way to encourage Indian startups to collaborate and create ‘Made in India’ solutions.
- Startup India Seed Fund Scheme: With an allotted budget of Rs. 945 crores, this scheme was launched to support early-stage enterprises. Startups were also given grants.
- Startup India Initiative: The scheme was launched to provide tax benefits to entrepreneurs and more than 50,000 firms have been recognized through this.
- Software Technology Park: The STP is a unique system that is 100% export oriented. The goal is to increase and export computer software and technical services.
- Credit Guarantee Fund Trust for Micro and Small Enterprises: Under the scheme, MSME firms can avail of zero-collateral business loans.
- Centre of Excellence for Internet of Things (IoT): Launched under the Digital India Initiative, the scheme enables India’s IoT ecosystem by supporting the development of related technologies.
- Cert-In: It was launched to secure Indian cyberspace through security quality management services as well as incident prevention and response solutions.
The above are just some of the major and recent initiatives, there are several other initiatives launched by the government to empower digital India like Digital India, BharatNet, Make In India, Skill India, e-Kranti, and more.
With the growth in advanced technologies like cloud computing, AI, machine learning (ML), robotics, automation, and more – a question that pops up is – whether India can become a global tech hub in the coming years or maybe even the next Silicon Valley.
Is India poised to become the next global technology hub?
In the past few decades, India has emerged as a key player in the field of IT. The pandemic-induced shift to digital transformation also played a major role in shaping the Indian IT sector. Indian companies were quick to resort to the remote working trend during nationwide lockdowns. It would be safe to say that the IT sector faced the least resistance to adopt to work from home practices – due to their reliance on and quick adoption of digital technologies like cloud computing.
Many factors are driving the growth of India’s IT sector and may prove integral in leading India to become a technology superpower. Some of them we have discussed below:
Factors driving India’s cloud computing and technology growth
Growing startup ecosystem
India is becoming the startup hub of the world. As per NASSCOM’s Tech Startup report 2022, India is now home to 25,000 – 27,000 start-ups – making India the world’s third-largest tech start-up ecosystem. The country added 1,400 unique funded tech startups in the calendar year 2022.
The growth is fueled by a favorable policy environment, access to capital, and a growing culture of entrepreneurship.
The Indian startup ecosystem is home to several unicorns such as Flipkart, Paytm, and Ola, and has attracted global attention and investment.
Not only domestically, but Indian start-ups are also faring well on the global stage. A perfect example would be Freshworks.
Freshworks which is a San Mateo-based software-as-a-service (SaaS) firm, has emerged as a leading example of India’s burgeoning digital start-up scene. In September 2021, the company successfully raised $1.03 billion in its Nasdaq IPO and achieved a valuation of $10.1 billion. With a workforce of around 4,300 employees, Freshworks also became the first Indian-born SaaS company to be listed on a US exchange.
“We now have talent, funding, and demand. The last missing piece of the puzzle in my mind is how can we build in India but acquire customers all around the world?” – said Girish Mathrubootham, Freshworks’ CEO, and cofounder in an interview with McKinsey.
This accomplishment underscores India’s potential as a technology and innovation hub and is expected to inspire other Indian start-ups to aim for similar global success and attract more investment into India’s thriving start-up ecosystem.
Increasing mergers & acquisitions (M&As) and Investments
Another driver of India’s IT sector’s growth is increasing M&As and investments by the world’s leading tech companies like Amazon, Google, Apple, etc.
M&As are instrumental in expanding the reach of Indian companies, diversifying offerings, and acquiring new talent and technology. The trend of M&As is not going to slow down any soon as Mayank Jaswal, Partner – Consulting, Deloitte said in a statement – “With Indian economy likely to do well despite global economic headwinds, we expect that M&A activity in India will remain robust, with companies expected to continue picking up attractively valued targets in India and abroad.”
India’s IT sector is now also attracting significant investments from both domestic and foreign investors. This is in part due to the government’s focus on initiatives like Digital India and Make in India to help create a favorable investment climate for the sector.
Some examples can be:
- Earlier in 2020, we saw Google’s pledge to invest $10 billion in India.
- Microsoft announced the investment of 16,000 crores for setting up three more data centers in Hyderabad, India, earlier in 2022.
- AWS also announced to invest $4.4 bn in India by 2030 through a new Hyderabad region service.
There can be tons of different examples, but we will not be going into detail about each in this article.
The increasing investment by tech giants is a clear indicator of the potential of India in becoming the next leader in technology.
The vast pool of IT talent
India is widely known for its vast pool of IT talent. With a strong education system and top engineering universities and colleges offering computer science, India produces many skilled IT professionals every year. India is also home to several IT companies and technology parks that attract talent from across the country.
Indian IT professionals have advanced technical skills, problem-solving abilities, and the ability to work on complex projects. Many Indian IT professionals also have excellent communication skills which makes them well-suited for working in global teams.
Favorable government policies and support
The Indian government has been supportive of the growth of the IT sector in the country, and it has been prevalent with the implementation of several policies and initiatives focused on the growth of the Indian IT sector and Small and Medium-Sized Businesses (SMBs) (as discussed earlier in the article).
One of the significant initiatives was the Digital India campaign – which aimed to transform India into a digitally empowered society and knowledge economy. It included various schemes to improve digital infrastructure, promote digital literacy, and ways to enable access to digital services for citizens.
The government has also set up various technology parts and special economic zones (SEZs) that provide tax benefits and other incentives to IT companies operating in these zones. These SEZs offer world-class infrastructure and facilities to attract large IT companies to set up operations in India.
The government has also implemented several policies to promote entrepreneurship and innovation in the IT sector, such as the Startup India initiative, which provides funding and support to startups. The government further launched various schemes to upskill and train IT, professionals, ensuring a steady supply of skilled talent for the IT industry.
Increasing internet usage in the country
With a population of 140 crores, India is one of the largest markets in the world. And to add to this number, there are over 700 million internet users, and the number is only expected to grow in the coming years with an increased focus on digitalization.
This makes it an ideal demand generator and is a huge advantage for businesses looking to offer digital services in India and expand their operations in the country. The rise of e-commerce and digital payments has also led to the growth of online businesses in India – creating new jobs and contributing to the overall growth of the economy.
The growing number of internet users has also increased the demand for digital technologies like cloud computing, cybersecurity, and digital marketing. This has created new opportunities for businesses in the IT sector to provide these services to clients in India and around the world.
Low cost of operations and tax advantages
The cost of doing business in India is lower compared to many other countries, especially developed nations.
India’s relatively low labor costs are one of the main reasons why many businesses find it cost-effective to operate in the country. The wages of skilled and semi-skilled workers in India are generally lower compared to developed nations. Additionally, India’s large population provides a vast pool of labor, which can be leveraged by businesses to reduce costs.
Moreover, India has implemented various policies to promote investment and reduce bureaucratic hurdles for businesses. The government has introduced measures such as the GST (Goods and Services Tax) and the Companies Act, which have simplified the tax and regulatory framework for businesses.
Challenges that need to be addressed
While India has made significant strides in becoming a tech superpower, there are still several challenges that need to be addressed to sustain its growth and achieve its full potential. Some of the major challenges include:
- The need to expand access to high-speed internet and improve network quality.
- A skill shortage in emerging tech areas like cybersecurity and artificial intelligence.
- Need to reform the present education system to produce more professionals with specialized skills that are in demand.
- Increase investment in R&D from both the private and public sectors, to foster innovation and develop new technologies.
- Streamlining regulations and reducing bureaucratic hurdles can help create a more favorable environment for tech companies to operate in.
- India also needs to strengthen its cybersecurity infrastructure and implement policies to protect critical infrastructure and data.
Addressing these challenges will require a coordinated effort from the government, private sector, and academia. By addressing these challenges, India can continue to grow as a tech superpower and contribute to the global technology industry.
India’s growth outlook for 2024: positive trends and promising future
The future looks promising for India’s cloud computing and technology growth in 2024. India’s tech industry has been growing rapidly, and cloud computing and other emerging technologies are expected to play an even more significant role in shaping the future of the Indian economy.
The government’s focus on building a digital infrastructure through initiatives is expected to further fuel this growth. AI is also expected to be a major driver of growth in India’s tech industry, with applications in areas such as healthcare, agriculture, and education.
The future of technology growth in India is also expected to be driven by emerging technologies such as blockchain, 5G, and the Internet of Things (IoT). The government’s focus on building a supportive regulatory environment for emerging technologies is expected to create new opportunities for innovation and growth.
However, it will not be free of challenges, as we discussed in the previous section.
For businesses looking to expand services in India, this seems like a perfect time to do so. Indian companies and tech startups should also explore ways to expand their services through strategic partnerships.
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