What's Troubling Indian Tech Titans And What Can Bring Back Glory Days

Once the symbol of innovation and growth, it is currently facing both a dip in revenue and talent stagnation. Major players in the industry have experienced slower growth, leading to downward revisions in their financial forecasts and hiring targets.

The number of new IT companies in India has sharply decreased over the past five years, plummeting from over 15,000 in the financial year 2020 to a mere 2,419 in fiscal year 2025, according to the Ministry of Corporate Affairs.

India appears to be lagging in the burgeoning field of artificial intelligence to add to the troubles. India accounts for a meagre 0.37% of AI patents granted globally, significantly lower than the United States' 14% and China's dominant 70%, as highlighted in the Stanford AI Index Report.

The flow of private investment into India's AI sector also reflects this lag. The country has attracted only up to $11.29 billion in investments, contrasting with the substantial $470 billion that the United States has garnered.

Further, the Indian AI startup ecosystem is also trailing, with less than 100 new companies compared to the United States' impressive figure of over 1,000. Despite these, AI hiring in India has reached its highest numbers yet, demonstrating a significant 33% year-on-year increase. This indicates that while Indian talent in AI is thriving, the established IT companies are running into difficulties.

The Glitch in the IT Sector

The current moderation is attributed to a shift from the aggressive growth experienced during the pandemic period, according to Shiv Kapoor, director at Fitch Ratings. He notes that while there was an initial positive sentiment, the introduction of tariffs subdued this enthusiasm.

Discretionary spending has decreased, prompting a re-evaluation of cost efficiency within the sector, according to Shiv Kapoor. Kapoor emphasises the current focus on identifying projects that are both profitable and cost-efficient, as customers continue to prioritise cost optimisation. This does not imply that revenues will flatten, according to Kapoor.

The current downturn is viewed as a "temporary pain" resulting from the rapid advancements in AI, according to CP Gurnani, co-founder of AIonOS. Gurnani points to geopolitical stresses as a contributing factor, leading to hesitancy to commit to discretionary AI spending. Despite these challenges, Gurnani believes that "the pain is temporary."

What's The Way Ahead

"I am optimistic based on only one parameter, talent. Global talent in AI is coming from India. There is a lot more 'co-innovation that's happening." said Shiv Gupta, the chief executive officer of KDEM.

Optimistic based on the strength of India's talent pool, he anticipates that the cost efficiencies brought about by AI will soon be absorbed, saying, "We are on track."

Gupta highlights the significant contribution of Indian talent to the global AI landscape, noting that global talent in AI is coming from India. "We will beat others on technology and talent," he added.

Meanwhile, in the hiring landscape, Neeti Sharma, chief executive officer of TeamLease Digital, acknowledges that there have been troubles in the last two years, noting a slip in recruitment.

She highlights a recent upside with about 60,000 hires, including both freshers and experienced professionals, from FY24 to FY25.

While there were initial hopes for a stronger first quarter following the closing of the fourth quarter, Sharma said that the prevailing "geopolitical situations" might be causing a pause.

She also noted that companies are currently not hiring in large volumes, focusing more on replacement hiring. This puts IT hiring in a "wait and watch situation", she said, while the demand for AI talent has seen a notable uptick.