Indian IT spending to grow 11% YoY in 2024 to reach $44 billion: report

Information technology (IT) spending in the country is expected to reach $44 billion in 2024, growing 11% year-on-year, according to market intelligence firm IDC.

Further, the spending will accelerate at a compound annual growth rate (CAGR) of 9.9% and exceed $59 billion in 2027, indicating that India’s digital economy will continue to thrive.

Overall, AI spending is anticipated to grow 35% this year while GenAI spending is expected to surge 160%. Spends on generative AI as a share of overall AI spends in the country will increase from 6% in 2024 to 26% by 2027, growing at a CAGR of 101.6%, IDC’s research found.

The research estimated the AI market in India to reach $1.7 billion in 2023.

The software market is forecast to consistently see double-digit growth in the next three years as per the research, which was presented at the India CIO Summit 2024.

“In 2023, despite economic headwinds and uncertainty, Indian enterprises continued to invest in digital to increase customer engagement and satisfaction, launch new products and services, and improve operational efficiency to drive revenue growth and profitability,” IDC said in a statement.

It added that IT budget allocations were mainly towards software, application development and cloud migrations, which reflected a judiciousness to make their hardware assets work longer and elongating refresh cycles.

Spends on devices declined 12% in 2023 and will grow 8% in 2024 as companies invest in refresh cycles and look to adopt AI-enabled PCs, IDC leaders said on the sidelines of the summit.

Spends will grow 23% for app development and deployment, 17% for applications, 6% for IT services, and 16% for infrastructure-as-a-service.

“India Inc.’s shift to digital continues unabated as enterprises march aggressively towards an AI future. We can clearly see this in the growth of AI investments from Indian enterprises,” says Vasant Rao, managing director, IDC India and South Asia.

Sharath Srinivasamurthy, associate vice president, IDC said at the event that while in the first wave of GenAI adoption in 2024-25, organisations will focus on driving productivity, the second wave by 2026 would see a focus on business function use cases in HR, sales, marketing etc. By 2026-27, one could see the emergence of industry use cases in healthcare, manufacturing, etc.

Globally, ICT spending is anticipated to expand by more than 6% (3x of projected GDP growth) in 2024 despite the economic headwinds and uncertainty, “as we enter a new era of accelerated digital innovation, driven in part by greater investment in automation and generative AI,” according to Steven Frantzen, head of worldwide strategy and senior vice president and regional managing director (EMEA), IDC.