India's AI, GenAI spending set to grow 34% to $6 bn by 2027: IDC

Spending on artificial intelligence and generative AI is expected to reach $6 billion by 2027, registering a compound annual growth rate of 33.7% for 2022-2027, according to data intelligence firm International Data Corporation (IDC). Over the years, AI and GenAI adoption has significantly increased in India, which comprises software, services, and hardware for AI-centric systems.

The spending is forecasted to exceed $512 billion worldwide by 2027. This figure is more than twice the market size in 2024. IDC Direction, an event organised by the group earlier this month, focused on the digital business impact of AI everywhere and discussed global and local industry trends, outlooks, and predictions.

“India is the sleeping giant in Generative AI. Its scale, skills, and startups are set to transform not just AI in India but also in the world,” says Dr. Christopher Marshall, VP at IDC Asia/Pacific.

The report said over 76% of Indian enterprises either are already focused on GenAI proof of concepts or already have an investment plan in place. Over 40% of service engagements will have genAI-enabled delivery mechanisms by 2025, triggering a shift from human-delivered services for strategy, change, and training.

The International Data Corporation's Worldwide Semi-annual Services Tracker, however, that in 2023, the Indian domestic IT & Business Services market recorded a 6.1% year-over-year growth, slightly lower than the 2022 growth of 7.4%. The moderation in growth rate may have been an outcome of enterprises’ caution towards their IT spending due to volatile macroeconomic conditions.

“In the coming years, IT service investments will be driven by interest in GenAI. Enterprises will continue engaging with IT service providers to develop POCs and also to transform and manage their complex IT infrastructure and applications,” said Harish Krishnakumar, Senior Market Analyst at IDC India.

The IT and business services market is expected to grow at a CAGR of 7.3% between 2023-2028 and touch US$ 20.7 billion by the end of 2028. The three primary markets into which the group classified the IT&Biz market include project-oriented, managed services, and support services. The project-oriented services market registered the highest growth rate at 6.8%, followed by managed services and support services.

“The industry today is incredibly dynamic, driven by the advent of AI and GenAI, prompting enterprises to rigorously examine use cases to ensure the delivery of measurable business outcomes," said Neha Gupta, senior research manager of software and IT services market, IDC India. International Data Corporation (IDC) is a wholly-owned subsidiary of International Data Group, a data and marketing services company.

Meanwhile, the Ministry of Electronics and Information technology started the applications for AI fellowships under the IndiaAI Mission for B.Tech and M.Tech students at the top 50 NIRF-ranked engineering universities. These fellowships are aimed at supporting AI projects, fostering advanced skills and innovation, and strengthening India's AI ecosystem through education, research, and practical application.

The IndiaAI Mission is set to organise the ‘Global IndiaAI Summit’ for July 3-4 in New Delhi this year. The summit will focus on the development of the AI ecosystem, including compute capacity, foundational models, datasets, application development, future skills, startup financing, and safe and trusted AI.