The tech sector in India has been going from strength to strength in recent years. The country has long been known for its IT service sector and talented software engineers.
Further, there has been a notable increase in AI-focused start-ups in recent years, with the National Association of Software and Service Companies reporting over 1,600.
As a result, the latest projections for India’s tech sector are highly optimistic, expected to top $300 billion in FY26, according to the latest report from Reuters.
During this pivotal moment for India’s tech sector, the role of private investors, government policy and the way that AI is leveraged by the tech community are expected to play a critical role.
Dr. Ranjit Tinaikar, CEO of Ness Digital Engineering (article’s featured photo), was interviewed by The Indian Express’s Nandagopal Rajan this week to share his insights on how these trends are playing out.
Below are some highlights from the conversation.
Said Dr. Tinaikar: “The first pillar is talent. The second pillar is entrepreneurship. The third pillar is the government role in facilitation through policy regulation and in risk taking. And the fourth is capital. So what I have always found is that when it comes to entrepreneurship, individual business entrepreneurship, India is very strong.”
Expanding on why India already has an edge when it comes to the scale and depth of talent pool, Dr. Tinaikar explained “even if we have 1% of our population be strong in technology, well that’s a lot for the rest of the world. You still have 7.2 million software engineers in India, which is the second largest in the world.”
In addition to the scale of how much tech talent is available, Dr. Tinaikar mentioned the role of capital investment and government policy in the growth of the sector.
“Wherever the government policy and regulation have not played a very strong role, it has actually helped India, honestly. And then it comes to money. This is where I don’t think our capital markets are deep and broad enough to be able to sustain large scale big investments.”
Yet looking into the future, it seems the story of India’s tech sector is only partially complete without the mention of AI and the impact it will deliver.
“Now let’s take those three, four things and see what AI could mean to us. Yeah. I think on the entrepreneurship scale, the whole world is still scraping at the surface of AI.”
The Atlantic Council notes that the profound socioeconomic challenges that India’s 1.3 billion people face have fundamentally shaped its approach to AI. The idea of shining the spotlight internally to understand the most important AI use cases and where the biggest opportunities lie is one that Dr. Tinaikar touched on during the interview.
According to Dr. Tinaikar: “What India has to do is really look at AI within the context of its own economic needs and not look to the United States for it.”
“I think Geo in Telecom is a wonderful example of how they have taken this technology, telecoms technology and morph it for the Indian economy. Also, when I came to India, I remember people would say, I will give you a missed call. That’s the Indian consumer way of using technology.
“People use WhatsApp, not text messaging. When I used to work at Reuters, India used to have three times more of the breaking news alerts than any other country, though, because that’s how we consume information.”
“So I think the entrepreneurs of India will be well-served, not looking to the United States for the next big use case. So I guess we have to look at solving very uniquely Indian problems.”
Software development is at the very heart of Ness Digital Engineering, where its teams deliver full lifecycle digital transformation projects for a global network of enterprise clients.
For India, software engineers and IT services represent the backbone of the country’s tech sector and have played a huge role in increasing the overall GDP.
Said Dr. Tinaikar, “I understand software engineering because that’s what Ness specializes in. We have 7.2 million software engineers, maybe more. Okay. That’s the number I have in my head. For the last 20 years, the growth of IT and IT-enabled services in India’s economy as a percentage of GDP has doubled.”
“What does that mean? IT services have grown faster than the rate of the economy. It used to be 6%, 25 years ago, today it’s 10%.”
However, the strength of India’s deep tech talent pool isn’t just about the scale of numbers. As AI tools like CoPilot continue to develop, this is fundamentally changing the productivity of software engineers and how teams collaborate and operate.
Dr. Tinaikar continued, “Not only is India growing, this is growing double the rate of India. So that has been a fantastic growth story. It’s created jobs. It’s created, you know, after effects and things like that. Now, what AI does is fundamentally transforms the productivity of a software engineer. And scale is not an advantage alone. You need to completely re-skill your talent pool.”
The role of regulatory bodies and how they influence the pace of innovation was also covered in depth during the interview.
While every technology is subject to regulation, AI in particular has been hit with broad policies in some regions of the world.
Said Dr. Tinaikar, “So, the European Union said we need to have a policy on AI. So, they got all the thought leaders, the professors, the bureaucrats and created a 3000-page compendium on data and other kinds of regulatory policies on the use and development of AI.
“I personally believe such policies will bring the European economy to a grinding halt. I was in DC last week and I had the same question for an American policy maker. And they said we don’t want to do what you did.”
Here, Dr. Tinaikar was keen to point out that the way that AI is applied is actually very nuanced and specific to the use case and industry it’s being developed to support. For this reason, the policies and regulations aren’t so much about the technology itself but how each industry is going to adopt the technology.
“What we believe is that AI is a very domain specialized skills. AI is best controlled and managed by the various industries and sectors that use it. For example, we said, did you know that the Food and Drug Administration Authority of America has already approved hundreds of tools and techniques which use AI? Now, do you think a generic AI policy can control that? No.
“The FDA understands the domain is best positioned to develop its own policy.”
During the interview, Dr. Tinaikar also pointed out the importance of finding a way to build policies in a way that doesn’t stifle innovation and entrepreneurship.
“When it creates policies, don’t create policies that will over-regulate entrepreneurship. Don’t create a regulatory authority that cuts across all sectors in a uniform way. Empower the various industries and sectors to regulate themselves with some high-level guardrails. Learn from some of these mistakes that others are doing.”
Finally, Dr. Tinaikar also shared exclusive insights from the work taking place at Ness that highlighted the role of AI within software engineering more clearly.
Said Dr. Tinaikar, “We used AI-enabled software engineering tools to study the impact on productivity. And we came up with four results. The first result was that senior developers get more benefits from AI than junior developers. Both of them had productivity improvements, but senior people had more value from it.”
As a result, Ness found that AI wasn’t just changing the way that tasks were completed but actually disrupting the very structure of the team and they way that value and profit is derived from IT service models.
“What does that do to the traditional IT services pyramid? The traditional IT services business model is based on a pyramid. You have very senior experienced people at the top and then you have a bunch of freshers who are trained and so actually most of the percentage gross profit that IT services makes is from the lower end of the pyramid.”
“Now, if AI says that the senior engineers are still valuable, but the junior engineers, you will end up compressing. What happens to the pyramid of an IT services industry? What happens to its gross profits? It was fundamentally changed.”
Here, the rise of AI doesn’t mean that IT services aren’t valuable, but companies need to get ahead of how its changing the fundamental economics of the industry.
“That doesn’t mean that you need less people in the pyramid because your demand increases, you’ll need more freshers. But the point is the structure of the pyramid changes. So that is one, it’ll completely change the economics. That’s one. The second is if you look at AI today, it’s still in its nascent state. So it works better with legacy code because it’s understood better. If you try to build a completely new application in a new domain with AI, it’s a little harder. So what that does is it reduces the total barrier to knowledge in writing code,” he concluded.
As India prepares to see phenomenal growth for its tech sector, getting ahead of AI’s role in the IT services industry will be key to the future, helping to unlock new opportunities and build agile teams.
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