The budget’s proposals on digitization and technology revamp could result in a multi-billion-dollar opportunity for India’s big IT services providers such as Tata Consultancy Services (TCS), Infosys, Wipro and Tech Mahindra, according to Gartner India.

The estimates were shared exclusively with ET.

The government could spend more than $10 billion on technology solutions across IT, data centres, platforms, software and telecom, the technology forecaster has said.

Around 50% of this investment will be directed towards IT services and software solutions, it said.

TCS is expected to lead the charge in digitisation and technology revamp projects, while Tech Mahindra may do so in telecom and 5G opportunities.

In newer segments like logistics, agriculture and health-tech, the government tenders may go to smaller domain-specific companies and startups, according to research by UnearthInsight, which corroborates Gartner’s estimates.

Government initiatives like setting up 75 digital banks in 75 districts or using smart meters to ensure equitable access to utilities inch toward digital inclusion in service delivery, said Apeksha Kaushik, principal analyst, Gartner Research.

“Digital government offers opportunities to optimize existing citizen services and transform how the value of government is measured and delivered,” she said.

As of 2021, government spending on technology stood at $9.6 billion. This is expected to grow 11.6% in 2022 to $10.7 billion, Gartner said.

Around $5.5 billion of this will be directed towards software and IT services.

“As mobile became the primary channel of service delivery, industries stepped up digital to continue operations. A rapidly growing technology industry and initiatives like Make in India and production-linked incentive schemes are making India lucrative (technology spenders) among the emerging markets,” Kaushik said.

Currently, Indian public sector projects generate around $2.4 billion in revenue for the IT sector, according to Gartner.

While this is a minuscule share of the $195 billion Indian IT-BPM industry revenue, it has grown rapidly over the past five years, said Gaurav Vasu, founder, UnearthInsight.

Vasu said the government’s IT spending had been increasing at a rate of 8-10% over the past five years compared to about 2-3% previously.

“Based on the digitisation initiatives announced, there is a potential revenue opportunity of $4-$5 billion for IT services from the public sector (including the Navratna PSUs),” he said.

The budget has proposed several digital initiatives ranging from hi-tech services to farmers, digitization of land records and drones for agriculture to an ecosystem for upskilling citizens for digital jobs and digital universities.

It has also announced an open ecosystem for health, electronic passports; measures for establishing 75 digital banking units, launching a digital currency, digitization of state and central level systems through single-point access IT bridges and launching an e-bill system for suppliers to submit paperless bills to central ministries. Moreover, it also plans to tax virtual digital assets, which will also require extensive technical intervention.

These massive projects will help shore up revenue of Indian IT companies from the domestic market, which has remained in the low single digits.

For instance, TCS, which has been very aggressive in the domestic market, gets 5.5% of its $25 billion annual revenue from the domestic market, but has grown 15% year on year as of the third quarter.

For Infosys, this stands at about 3% but has grown 40% year on year as of the third quarter. While HCL Tech does not share its India business breakup, it earns 8% revenue from markets outside Americas and Europe.

HCL Tech has said in the recent past that it does not focus on public sector deals in India although it works with a number of domestic customers and services global customers from India.

With technology underpinning all key developmental projects, it may bring about a change in the way companies approach the India market.

Rajesh Nambiar, chairman and managing director of Cognizant India, told ET that the Indian market is one that the company will be looking at more closely. He said the company has ‘big plans’ for India and will be looking to capitalise on opportunities.

“We do have a thriving domestic business,” he said. “It is small, but it’s still very robust and it’s grown pretty well in the last couple of quarters. So, I’m very bullish about that piece of our business. Serving Indian customers is a delight and we’ve continued to do that. When we look at the Budget and then the economic growth that the country is going to have, we cannot ignore that.”

While large digitisation projects will be led by traditional IT majors due to their experience in working with government tenders, niche requirements will see the government tapping smaller players, Vasu of UnearthInsight said.

“We believe, in areas like healthcare, logistics and agriculture, they could reach out to mid- to small-size health technology companies and healthcare startups and also partner with companies through the Nasscom centre of excellence,” he said.

TCS has traditionally been strong in offering enterprise resource planning (ERP) solutions for state governments through both products and platforms. It will benefit from broader digitisation initiatives, said Vasu.

With CMC (former government-owned IT services provider) under its belt, TCS has an advantage in initiatives that require technology revamp and record digitisation as in the case of Indian Railways and Passport Seva projects, he added.

TCS recently bagged the second phase of the Rs 8,000 crore Passport Seva project.

The Ministry of External Affairs’ contract for delivering electronic passports – valued at around Rs 1,200 crore – which was announced in the Budget, may also be serviced by TCS.

Companies like Tech Mahindra and KPIT have been strong in the telecom space and will benefit from the 5G initiatives.

Blockchain offerings like TCS Quartz and Infosys’ India Trade Connect can also be expected to vie for the central bank’s digital currency opportunity.

Budget 2022 proposed plans to introduce a Digital Rupee, “using blockchain and other technologies”, to be issued by the Reserve Bank of India starting 2022-23, leaving the field open for IT service partners.

“We believe that India will be a platform-driven market, be it consumers or institutions and corporates, everybody is used to a platform,”’ said N Ganapathy Subramaniam, chief operating officer, TCS during its third quarter results announcement in January. “They are going after digital in a big way and are consumers of digital platforms in a big way.”

TCS is positioning itself to provide apps and platforms that can integrate with India’s digital stack and provide solutions to customers across government, industry or even B2C.

It is also investing in platforms in banking, Application Programming Interfaces for microservices that can connect to the India digital stack.

India stack refers to a number of APIs that allow governments and businesses in the country to offer services to users digitally.