India’s Tech Sector Gears Up for an Artificial Intelligence Revolution

India’s technology sector is on the cusp of a significant transformation, with a focus on artificial intelligence (AI) poised to drive growth. Companies like BMW are strengthening their partnerships with Indian IT and engineering services firms, positioning India to capture a larger share of the global digital services trade, valued at $4 trillion.

Rise of AI in India’s Tech Sector

Global firms are increasingly turning to India to develop their AI capabilities, leading to a surge in hiring. According to Crunchbase research, nearly 300,000 employees were laid off from U.S. tech companies in 2022 and 2023, while Indian roles accounted for a larger share of hiring at tech giants like Alphabet, Microsoft, Meta, and Amazon, as reported by staffing firm Xpheno. India’s market share in global capability centers stands at over 50%, reflecting its growing importance in the tech landscape.

Shift Towards Higher-Value Tasks

While many of the jobs in India’s tech sector are in back-office IT, finance, accounting, and HR operations, Indian workers are increasingly engaged in more complex and high-value tasks such as engineering research and development. For example, Canadian insurer Sun Life Financial relied on its Indian office to develop AI tools, showcasing the country’s evolving role in driving innovation.

Partnerships Driving Innovation

Partnerships between Indian firms and global companies are driving innovation in AI. A notable example is the joint venture between BMW and Tata Technologies to develop auto software in Pune, Bengaluru, and Chennai. These collaborations are expected to create more than a million jobs in data science and AI by 2026, according to Nasscom, further bolstering India’s position as a key player in the global tech industry.

India boasts the largest talent pool of data science and AI workers after the United States, according to Nasscom and consulting firm Draup. The country has also seen a 15% increase in the supply of general software engineers, reaching 3 million in 2022, nearly matching China’s numbers but at much lower costs, making it an attractive destination for tech companies looking to scale their AI initiatives.

Also Read | Canva Competes Adobe with Affinity Acquisition

Impact on Outsourcing Sector

The growth of AI in India’s tech sector is expected to have a positive impact on the country’s IT outsourcing industry, which accounts for 7.5% of India’s GDP. Industry leaders such as Tata Consultancy Services and HCL Technologies have seen their stocks rally, reflecting investor optimism about the sector’s growth prospects. HCL Technologies, for instance, now trades at 23 times the forecast next 12-months earnings, well above its five-year average of 18 times, indicating a bullish outlook for the company.

With global CEOs increasing their investments in AI-related technologies, India’s tech sector is poised for a significant upgrade. The country’s strong talent pool, coupled with its ability to offer cost-effective solutions, positions it as a key player in driving the next wave of innovation in the global tech industry.