Indian govt's IT spends to jump 12% to $9.5 billion in 2022, outpaces global govt spends

Government IT spending in India is set to reach $9.5 billion in 2022, a rise of over 12% from 2021, according to Gartner, Inc. On the other hand, global government IT spending, is estimated at $565.7 billion in 2022, up 5% from 2021, said the analyst firm. 

“Contrary to worldwide spending, all segments will experience growth in India in 2022,” Apeksha Kaushik, principal analyst at Gartner told Mint. She explained that the global geopolitical tension and the looming recession of the US is not expected to have much impact on the domestic market. 

Software is expected to remain the highest growing segment in India, forecast to record 28% growth in 2022, with spending expected to surpass $2 billion. It will be followed by IT services, which is expected to record 13.4% growth, with spending expected to total $2.4 billion. 

“Now, more than ever, governments are executing innovative activities by harnessing technology to streamline digital services, advance automation processes, evolve citizen experiences and build a data fabric,” she said. 

These investments will continue with the confluence of stimulus measures and increases in annual IT budgets, said Kaushik, as she sees the momentum to continue both at the national and state levels.  

"As hybrid work adoption increases in the country, there will be an uptick in spending on devices, including laptops, notebook and printers, across education, healthcare and other government departments," she said. 

Kaushik said that while data centre is witnessing a strong growth at present, with legacy modernisation continuing to be a priority in government, growth in the data centre segment will slow through the forecast period from 7.3% in 2021 to 1.9% in 2023.  

However, according to a June report by ratings agency CRISIL, data centre capacity in India is expected to double to about 1,700-1,800 megawatt (MW) by fiscal 2025 from 870 MW in fiscal 2022, powered by the combination of data boom, digital adoption and local data storage mandates. 

India’s data centre market is primarily driven by large hyperscalers like Amazon web services (AWS), Google, Microsoft, Facebook, IBM and Cisco. To cater to the increasing demand several global and Indian companies like NTT Data, Trellix, Vultre, CtrlS, Nxtra Data (Airtel India), STT India, Web Werks and Yotta Infrastructure (Hiranandani Group) have either set up their data centre operations or are expanding capacities. 

While many as 40 clearances are needed for setting up a data centre in the country at present, there seems to be hope on the horizon with MEITY declaring cloud data centres as special economic zones or SEZs.  

Kaushik said, pay-as-you-use is gaining momentum, so anything-as-a-service (XaaS) is expected to emerge as a new area of investment across government organisations. “The pandemic sped up public-sector adoption of cloud solutions and the XaaS model for accelerated legacy modernization and new service implementations,” said Kaushik. “Fifty-four per cent of government CIOs indicated that they expect to allocate additional funding to cloud platforms in 2022, while 35% will decrease investments in legacy infrastructure and data centre technologies.” 

Gartner predicts that by 2026, most government agencies’ new IT investments will be made in XaaS solutions. 

Kaushik also touched upon telecom services with the forthcoming 5G spectrum auction in India will be aimed at solving some of the challenges related to digital inclusion in the country. 

Jayanth Kolla, tech analyst and co-founder, Convergence Catalyst, also believes that the government – both at the centre and state level – in India is increasingly realising the potential on data-driven innovation. They are investing both money and energy to step up spending to build public infrastructure and drive economic growth. 

Neel Ratan, retired digital government leader of PwC Global Network said that the government CIOs could spend more on healthcare, agriculture and education this year. 

Key technologies that government CIOs in India will be prioritising their spending on in 2022 will be digital workplace and business continuity solutions, business intelligence and data analytics, responsible AI and blockchain along with improved data privacy and data sharing tools, said the Gartner report.