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Domestic rating agency ICRA in its latest report has said that the Indian IT sector's revenue growth will inch up to over 6 per cent in FY2024-25 from 3-5 per cent estimated for the ongoing financial year (FY24). It noted that the slower growth will have an impact on the hiring plans and staff addition will continue to remain ‘muted’ for the next 2-3 quarters. The $250-billion industry grew by 9.2 per cent in FY2022-23. 

According to the report, the muted hiring outlook is the result of a weak demand scenario and companies will be focusing on utilising the capacity in the past and improving the overall utilisation levels. It explained that the macroeconomic challenges in the biggest markets of the US and Europe have caused a slowdown in demand. It said the increased hiring in the recent past inflated the overall wage bills of companies and impacted the operating profit margins, but the same is likely to improve over the medium term as the wage costs stabilise and employee utilisation goes up.

The agency further said attrition has tapered in the last few quarters after rising up as there was higher demand for workers during the time of high demand for the sector's services. It stated that the revenue growth from the US (58-60 per cent of the industry's revenues) witnessed a sharp moderation in recent quarters as macroeconomic headwinds continued to intensify coupled with instability in the banking sector in the US, which is a key vertical for the Indian IT services companies, leading to lower technological spending, specially towards discretionary and non-critical transformation programmes.