India’s tech engine is primed for an AI boost

Tata Technologies

09/04/2024 02:19

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are his own.)
    By Pranav Kiran
       BENGALURU, April 9  (Reuters Breakingviews) - India’s
technology sector is primed for an artificial intelligence
boost. Companies like BMW  BMWG.DE  are deepening their ties
with the country’s IT and engineering services firms. That will
help India take a bigger share of the global $4 trillion digital
services trade.
    Global firms are shifting focus to develop artificial
intelligence capabilities and are relying more on their Indian
offices to do so. Nearly 300,000 employees across U.S. tech
companies were laid off in 2022 and 2023 according to Crunchbase
research. Meanwhile, India-based roles formed a larger share of
total hiring at tech titans like Alphabet  GOOGL.O , Microsoft
 MSFT.O , Meta  META.O  and Amazon  AMZN.O , as per data from
staffing firm Xpheno. The country has over 50% share in the
market known as global capability centres.
    Those jobs are mostly back-office IT, finance, accounting
and HR operations. But Indian workers are doing more complicated
and higher-value tasks such as engineering research and
development. Canadian insurer Sun Life Financial  SLF.TO , for
instance, relied on its local Indian office to develop AI tools,
according to consulting firm Zinnov. BMW and outsourcing firm
Tata Technologies  TATE.NS  recently formed an auto software
joint venture in Pune, Bengaluru and Chennai. By 2026, companies
are expected to hire more than a million data science and AI
workers in the country, according to industry lobby Nasscom.
That should boost India's exports of software, valued at $320
billion, or 11% of the global total.
    It helps that the country has the biggest talent pool of
data science and AI workers after the United States, according
to Nasscom and consulting firm Draup. Moreover, the supply of
general software engineers jumped 15% to 3 million in 2022,
putting the country nearly on par with China, and at much
cheaper costs.
    All this bodes well for the country's IT outsourcing sector,
which accounts for 7.5% of India's GDP. Shares of industry
leaders Tata Consultancy Services  TCS.NS  and HCL Technologies
 HCLT.NS  have rallied over 23% and 38% respectively in the past
year. The latter's stock now trades on 23 times forecast next
12-months earnings, per LSEG data, well above its five-year
average of 18 times. 
    With global CEOs increasing spending in all things
AI-related, India's tech engine is primed for a upgrade.
    Follow @PranavKiranBV on X
             
    CONTEXT NEWS 
    The BMW Group and Tata Technologies announced on April 2
that they have signed an agreement to form a joint venture to
establish an automotive software and IT development hub in Pune,
Bengaluru and Chennai.
    

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Graphic: Indian tech workers are doing more heavy lifting    https://reut.rs/4azkHuA
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 (Editing by Robyn Mak and Katrina Hamlin)
 ((For previous columns by the author, Reuters customers can
click on  KIRAN/ 
pranavkiran.t@thomsonreuters.com; Reuters Messaging:
pranavkiran.t@thomsonreuters.com@reuters.net))