The number of new IT companies founded in india has drastically decreased over the past five years, falling from 16,388 in FY20 to just 2,419 in FY25—a drop of more than 90%, which is a serious concern for the country's IT industry.
 
Karnataka, which is home to IT giants like Azim Premji's wipro and Narayana Murthy's Infosys, witnessed the worst decline in the creation of new IT businesses during this time, according to data provided by the Union Ministry of corporate Affairs (MCA) as part of a response in the Lok Sabha.

Karnataka Tops List
As per the ministry's data, the number of new IT companies formed in karnataka, the country's IT hub, fell from 2,544 in FY20 to 212 in FY25.

The statistics also showed that the number of new businesses in maharashtra, another significant IT hub, decreased from 2,483 in FY20 to 375 in FY25.  While Tech mahindra is located in Pune, the largest IT company in india, Tata Consultancy services (TCS), is owned by the Tata Group and has its headquarters in Mumbai.
 
 Similar to this, Telangana, a growing center for IT companies, saw a drop in business from 2,077 in FY20 to just 233 new businesses in FY25.  Smaller states and union territories have also seen a low number of new IT enterprises over this time, so the drop is not just confined to large states.

Industry leaders call out outdated business model
The drop coincides with significant difficulties facing India's IT sector, leading industry players like Infosys and HCLTech to demand a comprehensive rethink of the IT business model in light of AI disruption.
 
Over the last 30 years have seen a pretty linear scaling of IT services, and the business model is ready for upheaval.  "I believe that model's time is over, and over the past few years, we have been pushing our teams to figure out how to double revenue while using half as many people," Sajit Vijayakumar, CEO of Infosys Finacle, stated at a february industry gathering.

IT Sector marred by closures
A Moneycontrol study claims that the steep drop in the establishment of new IT companies is accompanied by a spike in industry closures, with data showing that almost 2,300 IT companies closed their doors in FY25.  With 459 businesses closing, maharashtra is at the top of the list, followed by karnataka with 440 closures.
 
Notably, the data also showed that although states like maharashtra and karnataka have reported high turnover in specific years, the sector has been plagued by uneven turnover growth.
 
 
 
 
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SIBY JEYYA

28/03/2025 10:07 AM