Indian government's IT spending to grow 9.4% in 2021, says report

The increased spending will be driven by various digital India initiatives including the first ever digital census expected this year. While presenting the Union Budget for 2021-22, finance minister Nirmala Sitharaman had announced allocation of Rs3,768 crore for digital census.

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Gartner has forecast that government spending on software, which includes application, infrastructure, and vertical-specific software is expected to grow at an even higher rate of 13.4% annually. Device spending will grow at 11.8%, followed by IT services, which is likely to grow at 11.2%. Expenditure on data centres, telecom services and internal services will see single-digit growth, with expected YoY increase of 7.8%, 6.3% and 5.7%, respectively.

“Due to the covid-19 outbreak, Indian government’s digital transformation projects were sidelined in 2020. The government will shift from being a cautious spender to opening the fiscal floodgates in 2021," said Apeksha Kaushik, principal research analyst at Gartner.

Wider adoption of artificial intelligence (AI), cloud services and blockchain will be key focus areas for the Indian government in 2021.

Kaushik points out, “the weakening economy forced the Indian government into reducing their IT spend across all segments."

IT spending in 2020 by the government fell across segments. For instance, expenditure on devices fell 20.1%, internal services by 10.9%, data centre by 10%. Overall, government IT spending in 2020 fell by 9.9%.

Compared to India, global IT spending by other governments during 2021 is forecast to grow at 5.1% annually totalling $482,800 million. Globally, spending on software services is expected to grow at 9.2%, while investment in other verticals hovers around 5%. The only exception is internal services, which is likely to decline 2.4%.

“Pandemic exposed weaknesses in the ability of government organizations to quickly respond, scale and secure essential services," said Irma Fabular, senior research director at Gartner.

Fabular points out that governments are innovating at a faster pace by adopting commercially available technology solutions for operational and mission critical needs.

According to NASSCOM’s estimates, India’s IT sector is set to post a 2.3% growth in revenue to reach $194 billion in FY21.