India’s IT spending set to hit $160 billion by 2025, fuelled by software and GenAI investments

According to the latest forecast by Gartner, Inc., India’s IT spending is projected to total $160 billion in 2025, an increase of 11.2 per cent from 2024.

Alongside, software spending in India is projected to record the highest annual growth rate, increasing by 17 per cent in 2025.

On average, leaders expect an 18 per cent jump in productivity over the next 12-18 months from GenAI and plan to allocate 6.5% of their functional budget to the technology.

GenAI is expected to replace 3.8 per cent of the headcount in 2024, 6.1 per cent by 2025, and 8.2 per cent by 2026. Business leaders expect to allocate 7.9 per cent of staff time to developing GenAI, according to Gartner estimates. The average expected change to the IT budget is 6.8%.

Indian chief information officers (CIOs) will begin allocating budgets for Generative AI (GenAI) beyond initial proof-of-concept (POC) projects. While spending on GenAI will increase, CIOs’ expectations for its capabilities will diminish, Naveen Mishra, VP Analyst at Gartner, pointed out.

CIOs are expected to increase spending on cybersecurity, business intelligence, and data analytics compared to 2024.

“Indian CIOs are also spending on services for their own consumption. When we look into the whole global services market, it remains characterized by macroeconomic conditions and is not very positive. The interest rate remains a concern. With all of that, we expect more customers focusing on three to five areas, especially in India, with app modernization being one. Cloud and consulting are the other two. These three areas, if we look at the growth rate, are where growth will come. This is where Indian CIOs will be spending,” he added.

Gartner predicts that by 2025, over 50% of application software offerings with GenAI capabilities will carry an associated price premium. Pricing options will continue to evolve through 2025 as buyers are tested for their willingness to pay a GenAI premium.

Gartner predicts that GenAI will be the main focus in 25 per cent of all AI services engagements by 2028, up from 8% in 2024.

Through 2028, AI-specific expertise will demand a price premium of 5% to 15% over non-AI expertise, with the percentage varying across the different services markets.

“The price premium of GenAI-enabled offerings across customer relationship management (CRM), email and authoring, and analytic platforms will drive software spending, resulting in the growth of this segment,” said Mishra.

Currently, in an organisation, GenAI has multiple use cases across customer service, HR, sales & marketing, finance, supply chain, procurement, legal risk, and compliance.

Despite the global services market being characterized by cautious spending, macroeconomic uncertainty, and higher capital costs, IT services spending in India is projected to grow 11.4% in 2025, he pointed out.

“Service engagements around cloud, application, and consulting are expected to drive stronger growth in India. Furthermore, GenAI’s role in delivering industry use cases and improving labour productivity will be a key expectation from Indian enterprises in 2025 and beyond.”

Spending on data center systems in India is projected to total $4.7 billion in 2025, fueled by the rising enterprise need for new infrastructure to support AI integration. Data center providers, including hyperscalers, are expanding their footprint in India to meet enterprise demands for increased data storage and computing capacity, while adhering to regulatory requirements, further driving the growth of this segment, Mishra noted.