India's Tech Industry Poised for Major Growth, Says Nomura Report

A new Nomura report highlights factors driving growth in India's tech sector, paralleling early-stage developments in countries like the U.S. and Taiwan. Government incentives, cost-competitive labor, and India's neutral stance in global tech rivalries are key elements fostering this expansion.

The Indian tech industry is witnessing a surge in development akin to early-stage tech evolutions seen in the U.S., Taiwan, and other countries, according to a report by Nomura. Key success factors highlighted include government support, cost-effective labor, and the presence of innovative and determined players.

"The evolution of the tech industry in countries such as the US, Japan, Korea, China, and Taiwan indicates a few common success factors, including government support; relatively cheap labor; and innovative and determined players. We note that similar conditions are developing in India," the report stated. The Indian government's initiatives, including the Production Linked Incentive (PLI) scheme and import restrictions, are pivotal to this growth.

"In our view, this is the right approach by the Indian government, and all successful countries have given strong government support to the tech industry for many years in their early stages," the report added. India's cost-competitive labor, which is 20-50% cheaper than in Vietnam and Thailand, bolsters its attractiveness for tech investment.

The report also emphasizes India's neutral stance in the ongoing U.S.-China tech rivalry, making it an appealing partner for both Western and Asian tech leaders. "India's neutral stance on the US-China tech rivalry makes it an attractive partner for both Western and Asian tech partners, in our view. We believe favorable conditions are also supporting capital flow into the sector," the report noted.

Nomura's report forecasts that these enabling factors will lead to substantial growth in India's electronics production, with projections of an increase from USD 115 billion in FY24 to USD 450 billion by FY30. This represents a compound annual growth rate (CAGR) of approximately 25%, driven by PLI schemes, reduced reliance on Chinese imports, and rising domestic consumption.

(With inputs from agencies.)