India’s NIFTY IT index added robust gains in the year 2024, recording over 22% climb annually. This is in comparison to an 8.8% gain in the benchmark NIFTY index which also marks the ninth straight year of positive returns, underscoring the sustained momentum in the Indian equity markets. India’s NIFTY IT index that captures the performance of the Information technology segment of the market marked a historic level above 45k mark in December, despite significant selling pressure across the broader market in November. The rally in IT stocks began following Donald Trump’s victory in the 2024 US presidential election. Trump’s proposed policies, including corporate tax cuts, sparked optimism about increased discretionary spending by US enterprises which is a key revenue driver for Indian IT companies, which derive 60–70% of their earnings from the US market.
Meanwhile, Nasdaq-listed IT services major Accenture has raised its annual revenue growth forecast for fiscal 2025 to 4-7%, up from the earlier projection of 3-6%. Accenture’s performance and outlook are of particular significance for India, where over 40% of the company’s global workforce are based. The company’s results often serve as a bellwether for the Indian IT sector, which looks to Accenture’s trends as an indicator of global demand. Accenture reported Q1 revenue of $17.7 billion, an 8% sequential increase.
IT and Business Services projected to expand at a CAGR of 6.4% between 2023 and 2028
According to the International Data Corporation (IDC) Worldwide Semi-annual Services Tracker, the Indian IT Services market grew by 6.4% year-over-year (YoY) in 1H2024, contributing 79.2% of the overall IT & Business Services market. While this growth marks a slight moderation from 6.7% in 1H2023, it reflects sustained investments in digital transformation, cloud migration, and GenAI adoption. Indian enterprises remained committed to critical IT initiatives, prioritizing cost optimization and operational efficiencies to drive competitiveness.
The broader IT and Business Services market in India reached USD 7.4 billion in 1H2024, registering a 5.9% YoY growth, compared to 6.2% in 1H2023. The market is projected to expand at a CAGR of 6.4% between 2023 and 2028, reaching USD 19.8 billion by the end of the forecast period. Modest overall growth reflects enterprise caution amid macroeconomic uncertainties, though continued investments in IT-led business transformation signal long-term resilience and opportunity.
Budget Expectations
Indian Finance Minister Nirmala Sitharaman is set to present the national budget on February 1, amid slowing growth and increasing global uncertainties. The National Association of Software and Services Companies (Nasscom) has appealed to the government to implement the Union Budget 2024’s commitment to enhance safe harbour rules and streamline transfer pricing assessment to attract Global Capability Centers (GCCs) and ease business doing for IT-BPM multinational enterprises (MNEs).
Nasscom has requested the Government to implement measures for giving effect to the Union Budget 2024 announcement to make safe harbour rules attractive and streamline transfer pricing assessment procedure. This will attract growth of GCCs and improve ease of doing business for the IT-BPM MNEs. NASSCOM elaborated that Global Capability Centres (GCCs) are primarily captive centres of foreign MNCs providing services to the parent’s global operations. GCCs in India have matured beyond just cost-effectiveness. They have assumed a strategic role in fostering innovation, driving technological advancements and spearheading digital transformation. They are now innovation centres rather than multi-functional support centres. Since GCCs provide services to their overseas group companies and operate on an operating cost-plus mark-up model, a favourable transfer pricing regime is a key consideration in their growth strategy.
In its recommendations for the Union Budget for 2025-26, NASSCOM proposes to strengthen availability of patient capital for DeepTech Startups in India by setting up a central DeepTech fund with a kitty of ₹10,000 crore to enable equity funding for DeepTech start-ups seeking early-stage investments, creating a grant framework for the DeepTech ecosystem, and allowing CSR contributions to approved funds for incubators or R&D projects in the field of science, technology, engineering and medicine. DeepTech startups represent a new frontier in innovation, leveraging advances in science and engineering to solve complex, real-world problems. According to nasscom report "India's DeepTech Dawn: Forging Ahead" released in June 2024, India is currently home to over 3,600 DeepTech startups, with approximately 500 launched in the last year. The report highlights that DeepTech startups constitute around 12% of India’s overall startup ecosystem, reflecting significant growth since 2019.
Nasscom also recommends broadening the eligible purposes for utilising the Re-investment Reserve under Section 10AA of the IT Act in order to help IT companies, operating within Special Economic Zones (SEZs), effectively utilise income tax benefits during the 11th to 15th years of operation. Currently, this section mandates that companies transfer a portion of their profits to the SEZ Re-investment Reserve and use these funds for acquiring plant and machinery.
Outlook:
Broad global economic outlook remains steady. World Bank projects global economy to expand by 2.7% in both 2025 and 2026, the same pace as in 2024, as inflation and interest rates decline gradually, according to a World Bank report. Growth in developing economies is also expected to hold steady at about 4% over the next two years. India’s economic growth is expected to remain steady for the next two fiscal years, starting from April 2025. The World Bank said that India’s growth is projected to remain steady at 6.7% a year for the next two fiscal years, beginning April 2025. This augurs supportive for the global IT services sector though the rapid advances in AI driven technology workflows and worries over global trade landscape under US President Donald Trump could bring in some cautiousness towards IT spends in coming months. The domestic IT industry will thus be expected continued policy support in such a scenario. There has been good capacity creation in this sector recently on a broad basis. Worldwide PC shipments totaled 64.4 million units in the fourth quarter of 2024, a 1.4% increase from the fourth quarter of 2023, according to preliminary results by Gartner, Inc. This marks the fifth consecutive quarter of sustained shipment growth.