India’s IT sector has emerged as one of the country’s largest pillars of the economy, where it plays a role in reshaping in terms of contribution to GDP growth, employment generation, and national competitiveness in the world scenario. The information technology industry, over the last three decades, has evolved from an emerging industry to a robust pillar of economic growth and is one of the largest contributors to the nation’s gross domestic product (GDP) and made India a software and technology services international hub.
Contribution to GDP
IT industry has been a steady contributor to the Indian GDP, whose share has been rising with every decade. Indian IT and BPM sector was contributing around 7.5% of GDP in 2023–24, as per the National Association of Software and Service Companies (NASSCOM), around 1.2% in 1998–99. The above growth indicates towards the industry’s huge contribution towards economic growth and also testifies the sector’s contribution in framing the national economic direction.
Indian IT industry turnover in 2024 stood at an estimated $254 billion, of which more than $200 billion was earned through software exports as a reflection of the high demand for Indian IT services globally. Export orientation in the sector has created a current account surplus and been a determinant of country foreign exchange reserves.
Employment Generation
IT is also a huge jobs base in India. It had directly employed over 5.4 million as of the year 2024 and created indirectly approximately 12 million jobs in supporting industries like real estate, education, and telecommunication. The industry is still one of the biggest human resource employment bases in the country.
Besides this, IT jobs also have a tendency to create high-skilled jobs that provide good employment packages and international exposure. The sector too has been growing as a leader in inclusive growth by creating employment not only in metropolitan cities such as Bengaluru, Hyderabad, and Pune but also in Tier-II and Tier-III towns by setting up IT parks and SEZs.
Export-Led Growth
India’s IT industry has the sheer power of dominating the international market. It has approximately 55% dominance of the international outsourcing market with key customers coming from the North American, European, and Asia-Pacific markets. Indian companies offer a variety of services such as software development, systems integration, IT consulting, and business process outsourcing (BPO). The model of export-led has driven India as a preferred destination for outsourcing and has led to a steady stream of foreign direct investment (FDI).
Export orientation of the industry has also driven Indian industry up the value chain — from cost-driven outsourcing to high-value IT services such as artificial intelligence, cloud computing, machine learning, and data analytics.
Technological Advances and Innovation
The IT sector has been driving India’s digitalization. Digital India, Startup India, and Make in India initiatives have been driven by the IT sector with earnestness, developing entrepreneurship and innovation culture. The IT sector has also collaborated with the government for e-governance, smart cities, fintech initiatives, and digital learning platforms, hence strengthening public service delivery and financial inclusion.
For example, technology services firms like TCS, Infosys, and Wipro have come together to implement country-level initiatives like the Goods and Services Tax Network (GSTN) and Aadhaar that have revolutionized the delivery and consumption of services to citizens. Second, the presence of more than 85,000 technology startups as of 2024 is a sign of entrepreneurship and dynamism in the industry.
Impact on Other Sectors
IT is also a growth driver for the country’s other industries. Its impact on banking, healthcare, education, agriculture, and retail has been transformative. Mobile payment systems and electronic banking solutions driven by IT innovations, for instance, have transformed money transactions in urban as well as rural India. EdTech platforms, telemedicine, and agri-tech solutions have also made opportunities available to good-quality services all over the country.
The high back and forward linkages of the industry have generated the demand for hardware, telecom services, office space, and higher education and hence have led to a dynamic digital ecosystem.
Challenges and the Road Ahead
Although successful, the Indian IT industry also has a number of problems. The recession in the world, regulation in the offshored nation’s economies, data privacy, and an impending shortage of skills on newer technologies have been the arriving issues. Otherwise, artificial intelligence and automation would be devouring the demand for conventional IT services, and it would require workers to be upgraded and re-upgraded.
In order to solve such problems, new-generation technologies such as Web 3.0, blockchain, AI/ML, and cybersecurity are being investigated by the government as well as industry. Investment in digital infrastructure, public-private partnerships, and R&D are the drivers for sustainability of the sector.
Conclusion
Indian IT sector, in short, is a support base for India’s economic infrastructure. Contribution of 7.5% to GDP, creation of over 5 million direct employment opportunities, and holding 55% of world software exports, it showcases the capability of service excellence and technological innovation to propel national growth. As India sets its eyes on a $5 trillion economy, the IT sector will remain a strategic catalyst — not merely in terms of wealth and employment generation but by making India a global powerhouse in digital innovation. Strategic investment in human development capital, infrastructure upgradation, and foreign partnerships will be the answer to maintaining and increasing IT’s contribution to India’s long-term economic success.
Prepared by
Dr Balajee Maram,
Professor, School of Computer Science and Artificial Intelligence, SR University, Warangal, Telangana, 506371.
balajee.maram@sru.edu.in
