JPMorgan's washout year forecast is a warning bell for Indian IT

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JP Morgan has projected FY24 as a "washout year" for India's $245 billion IT industry, which represents over 7.5% of the country's GDP. This isn't merely a reflection of earlier industry apprehensions, but a dire alert for the sector to address systemic challenges before it is too late. “We remain negative on the sector as we haven't seen a meaningful uptick in demand in our recent checks.

We think the overall setup is not as positive as last quarter," analysts at JP Morgan said in their latest research note. Based on their interactions with industry executives, the analysts felt that while there were a few “green shoots" here and there, overall, there was little indication of new deals and client signings in the pipeline. Major IT firms, heavyweights in the Nifty50 and BSE Sensex indices, have warned of a decline in earnings this year, attributing it to global companies recalibrating digital budgets post the pandemic-induced surge.

As a precursor to this, global IT services and consulting major Accenture's consulting revenues in the fiscal fourth quarter grew merely 2% year-on-year, in constant currency terms, with its bookings, an indicator of future growth, inching up just 1%. Accenture’s numbers are considered a bellwether for the Indian IT industry. Following Accenture's results, Kotak Institutional Equities predicts a flat to negative Q2 for top-tier IT firms.

One could argue that one bad quarter or two doesn’t spell disaster for the sector, which has managed to survive major crises in the past, from the 2008 global financial meltdown to the coronavirus pandemic. This time around, though, things may be different for India's IT majors. There are huge changes taking place in the marketplace – changes which India’s IT