Indian IT Spending Set to Reach $160 Billion with AI as Key Driver

ARABINDA RABHA

India’s IT spending is anticipated to surge to $160 billion in 2025, marking an 11.2% increase from this year, driven largely by demand for artificial intelligence (AI) and cloud services, as reported by research firm Gartner.

Speaking at the Gartner IT Symposium, Naveen Mishra, VP analyst at Gartner, highlighted that investments in cloud technologies, applications, and consulting services are propelling this growth. Furthermore, software spending is expected to record the most significant annual growth, increasing by 17%, as both application and infrastructure software markets expand.

The adoption of generative AI (GenAI) is a primary catalyst in this expansion, as businesses are rapidly exploring its capabilities across a range of industry use cases. In addition to its productivity-enhancing potential, GenAI is setting a new standard for technology investment, leading to increased expenditures and pricing premiums on AI-powered applications.

Gartner predicts that by 2025, over 50% of GenAI-powered applications will carry a price premium due to added features and benefits, reflecting a shift in how enterprises value and prioritize AI-enabled solutions.

“Software spending, particularly on applications involving AI and cloud technologies, is projected to be the fastest-growing segment of India’s IT market. GenAI, in particular, is emerging as a game-changer for customer relationship management (CRM), email and authoring tools, and analytics platforms.”

Rising Software Spending and the Impact of GenAI
Software spending, particularly on applications involving AI and cloud technologies, is projected to be the fastest-growing segment of India’s IT market. GenAI, in particular, is emerging as a game-changer for customer relationship management (CRM), email and authoring tools, and analytics platforms. These GenAI-enabled applications are driving demand, attracting premium prices, and shaping software spending patterns across the industry.

“From next year, we’ll see dedicated budgets for GenAI, beyond just initial pilot or proof-of-concept projects,” said Mishra. As GenAI’s role evolves, so do CIOs’ expectations. While there is an increase in spending on GenAI, expectations regarding its capabilities are becoming more realistic.

Indian CIOs are increasingly focused on cybersecurity, business intelligence, and data analytics, which are expected to see substantial budget increases in 2025, signaling a more strategic approach to AI integration.

Data Center Growth and Regulatory Compliance
India’s data center market is also experiencing substantial growth, with projected spending reaching $4.7 billion in 2025. Hyperscale providers and data center operators are expanding their presence to meet the demand for data storage and computing capacity. This growth is further driven by regulatory requirements in India, which emphasize data localization and security.

The expanding footprint of data centers in India aligns with enterprises’ needs for secure, scalable infrastructure, supporting a range of advanced technologies, including AI and big data analytics.

This rapid digital transformation positions India as a pivotal player in the global IT landscape. As AI, cloud computing, and data analytics become increasingly integral to business operations, India’s IT spending growth reflects a proactive approach to adopting emerging technologies, making it a significant market for global technology providers.

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