New report reveals: India’s tech industry is hanging

The report presents a mapping of the global technology market, which is estimated at approximately 8.4 trillion dollars. While IT services make up only about 17% of the global market, most of the growth and high multipliers are in other areas: artificial intelligence-based companies are growing at a rate of over 40% per year, cloud platforms are growing at about 20%, the software sector at about 15%, and chips and diptech at around 12%.

The value multipliers also reflect the gap. AI and Diptech companies trade at multiples of 17 to 20, compared to only 2 to 3 in IT services. In other words, future value is concentrated in intellectual property-based technologies, R&D and capital-intensive infrastructure, areas where India has almost no presence today.

At the same time, the investment in research and development in India is only about 0.7% of GDP, a rate significantly lower than that used in leading economies, where it is 3% to 4%. The patient capital required for investments in deeptech and deep technologies also remains limited, and the local regulation sometimes creates friction for young companies.

BCG emphasizes that the model that made India the “cheap labor force of the world” has exhausted itself. The extensive service industry has built global trust and large-scale execution capabilities, but today high added value is created around the development of products, platforms, chips and cloud infrastructure.

The main message of the report is that India cannot be satisfied with maintaining its position as a global service center. To remain relevant in the next decade, it must carry out a deep structural change, increase investments in research and development, strengthen international collaborations and build an ecosystem that enables a transition from personnel-based services to intellectual property-based innovation.

Modi’s visit to Israel illustrates the crossroads where India is. Behind the impressive macro data hides an industry that relies on an old growth model, while global value is shifting to knowledge- and capital-intensive technologies. If it wants to maintain the rate of growth and its position in the global arena, India will be required to deepen collaborations with leading countries, increase investment in research and development and build independent innovation engines in the fields of artificial intelligence, chips and the cloud.