India's GDP expected to grow at 8.5% in 2022: NASSCOM

The National Association of Software and Services Companies (NASSCOM) in its Quarterly Industry Review said that India's GDP is expected to grow at 8.5 per cent in 2022, in line with IMF's estimates for the next year. The IMF has also projected a 9.5 per cent GDP growth for India this fiscal.

However, the global GDP, NASSCOM said, is expected to increase by 5.9 per cent in 2021. "Though uncertainty around the pandemic remains, the growth momentum is expected to continue with the global GDP growing by an estimated 4.9 per cent in 2022," it adds.

NASSCOM said that revenues grew 4.5 per cent quarter-on-quarter (q-o-q), and 17.8 per cent year-on-year (y-o-y) with digital and cloud remaining the major drivers. It said that growth in revenues across all the major markets continued sequentially as well as y-o-y. "Revenues from India bounced back this quarter, growing 8.1 per cent q-o-q," the report adds.

When it comes to sector-wise growth, all sectors continued to witness growth sequentially as well as on y-o-y basis. "Manufacturing led in terms of sequential growth and BFSI (banking, financial services and insurance) maintained lead on annual growth, while with travel and hospitality showing a strong rebound," NASSCOM said.

Net margins, however, continued to decline sequentially primarily driven by salary hikes, new hires, increased sub-contracting costs as well as travel and facility costs. "This quarter, y-o-y margins also declined as talent availability continues to put pressure on hiring, retaining and sub-contracting costs," it said. Talent availability driven by increased attrition remains a key challenge that companies continue to address on priority, it added.

"Employee count increased 5.3 per cent q-o-q; and was up 17.5 per cent y-o-y as hiring remained the key strategy to counter talent availability. Also, as the demand environment remains healthy, companies' plans to hire more in the next few months of 2021," NASSCOM said.

It added that attrition maintained its uptrend reaching 19.3 per cent this quarter, up from 17.5 per cent last quarter. According to the industry body, this increase continues to be driven by the rising demand for new-age digital skills across industries. Companies continue to counter this trend through increased fresher hiring and focusing on reskilling and upskilling their current workforce.

A recent EY India report had argued that India's goal of becoming a $5 trillion economy may have to wait till 2029-30 in a "worst-case" outcome. "This is still lower than the previous peak of trend growth rate of close to 7 per cent during the four years from 2007-08 to 2010-11. In fact, if we include the forecasted growth of 9.5 per cent for this year and 8.5 per cent for 2022-23, the trend growth rate is uplifted to only 4.9 per cent by 2022-23," EY India said in the report. "This suggested the need for initiatives to lift the trend growth rate to 7 per cent or above in the medium term," it added.

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