How the World is Spending on Tech Services

The way businesses spend on technology is evolving fast, and a few key trends stand out. As companies worldwide continue to digitize operations, spending on enterprise technology services (ETS) is growing at a steady pace. However, not all segments of technology are growing equally—some are booming while others are stabilizing. So, where is the money going? And why are financial services leading in artificial intelligence (AI) adoption? Let’s break it down.

Tech Spending Growth: Slower but Steady

During the pandemic, businesses had no choice but to rapidly invest in IT services to support remote work and digital operations. Now, as things stabilize, the global ETS market is expected to grow at a compound annual growth rate (CAGR) of 5% until 2029. But when we look deeper, we see that IT services are growing faster (7% CAGR) than business process (BP) services (2% CAGR). This suggests that companies are now focusing more on upgrading their technology rather than outsourcing business functions. Imagine a retail company: Instead of outsourcing customer service operations (BP services), they might now spend more on cloud computing and AI-driven chatbots to handle customer interactions more efficiently.

The Real Winner: AI, Data, and Analytics

If there’s one area set to explode, it’s data, analytics, and AI. Companies are expected to double their spending in this area within five years—from ₹8 lakh crore in 2024 to ₹17 lakh crore by 2029. Why? Because data is now the backbone of decision-making. Businesses that leverage AI to analyze customer behavior, predict demand, and automate tasks have a massive competitive advantage. Think about how streaming platforms like Netflix recommend shows. Their AI analyzes viewing habits to personalize suggestions. Now, apply that logic to every industry—banking, healthcare, retail, and even manufacturing—and you see why AI spending is skyrocketing.

Generative AI: The Game Changer

While traditional AI has been around for years, Generative AI (Gen AI) is the new frontier. Unlike older AI models that primarily recognize patterns, Gen AI can create entirely new content—from writing marketing copy to generating images and even coding software. Businesses are rushing to invest in Gen AI, and the numbers prove it: Outsourced Gen AI spending is expected to grow from ₹0.8 lakh crore in 2024 to ₹7.9 lakh crore in 2029 (a 60% CAGR!), and even traditional AI spending is increasing at a significant 20% CAGR. This means companies are not just buying AI tools but outsourcing AI-driven solutions, such as AI-generated product designs, automated financial reports, and intelligent virtual assistants.

Financial Services: The Biggest AI Adopters

Among industries, financial services are leading the charge in AI adoption—accounting for 33% of all Gen AI deployments. Why? Because AI helps banks and financial institutions in multiple ways: Fraud Detection – AI can analyze millions of transactions in real time to flag suspicious activities. Personalized Banking – AI-driven chatbots assist customers, answer queries, and recommend financial products. Automated Trading – Investment firms use AI to predict market trends and make faster, data-driven trading decisions. Other industries adopting Gen AI include pharmaceuticals (18%), retail (16%), and manufacturing (12%)—all looking for ways to automate processes and improve efficiency.

What Does This Mean for Businesses?

If you're a business leader, the key takeaway is clear: Investing in AI and data analytics is no longer optional—it’s a competitive necessity. Gen AI is set to revolutionize industries, from banking to entertainment. IT services will continue to grow, but the biggest leaps will happen in AI-driven solutions. As the world moves toward a more AI-powered future, companies that embrace these changes will stay ahead, while those that ignore them might struggle to keep up. Are we ready for a world where AI plays a central role in every business decision? The numbers suggest we’re already heading there.

After the Rate Cut: What It Means for You

The Reserve Bank of India (RBI) recently reduced its policy repo rate by 25 basis points to 6.25%. This move was widely expected due to lower inflation projections and slowing economic growth. But what does this mean for the average person, businesses, and the broader economy? And what risks does the global environment pose?

Why Did the RBI Cut Interest Rates?

Imagine you’re running a small business and have taken a loan to expand. If the bank lowers interest rates, your loan repayments become cheaper, making it easier to invest in new machinery, hire workers, or increase production. This is precisely what the RBI aims to do—reduce borrowing costs to stimulate economic activity. The decision was based on inflation projections. The RBI expects consumer price inflation to average 4.2% in 2025-26, down from 4.8% this year. Since inflation is nearing the RBI’s comfort level, the central bank saw an opportunity to ease monetary policy and support growth.

What Does This Mean for You?

A lower repo rate affects different sectors of the economy in various ways: Borrowers Benefit: If you have a home loan, car loan, or personal loan, banks may lower interest rates, reducing your EMI payments. Investors Take Note: Lower interest rates mean lower returns on fixed deposits and savings accounts, pushing investors toward stocks or other assets for better returns. Businesses Get a Boost: Companies can borrow more cheaply, encouraging expansion, investment, and job creation. However, the impact depends on whether banks actually pass on the rate cut to consumers. Sometimes, banks hesitate to lower lending rates immediately, reducing the short-term impact.

The Global Risks in Play

While a rate cut can boost domestic demand, the global economy presents challenges that could offset these benefits. The Strong US Dollar and Rupee Depreciation: The US has been tightening trade policies, imposing tariffs, and signaling further economic restrictions. These measures have strengthened the US dollar, making emerging market currencies like the Indian rupee weaker. The rupee has already depreciated by over 2% in 2025, and if this trend continues, it could increase the cost of imports fuel, electronics, and raw materials leading to higher inflation. Supply Chain Uncertainties: Global trade disruptions, whether due to geopolitical conflicts or supply chain bottlenecks, could push up prices. If imported goods become more expensive, inflation might rise despite the RBI’s rate cut. Inflation Risks and Future Rate Cuts: The RBI has signaled that further rate cuts might be on the horizon if inflation remains under control. But if the rupee keeps weakening or global commodity prices rise, inflation could pick up, limiting the RBI’s ability to cut rates further.

The Bigger Picture: Balancing Growth and Stability

The RBI’s job is a balancing act cut rates too much, and inflation might surge; keep rates too high, and economic growth could slow. Recent research suggests that the neutral interest rate (where the economy is neither overheating nor slowing down) is between 1.4% and 1.9% in real terms. With the current rate cut, the RBI is moving cautiously toward this level. The central bank will likely assess future rate cuts based on inflation trends, rupee stability, and global economic conditions. If inflation remains under control and global risks ease, we might see another cut later in the year.

Final Thoughts

While the RBI’s rate cut is good news for borrowers and businesses, global uncertainties remain a key factor to watch. A strong US dollar, trade tensions, and supply chain disruptions could offset some of the benefits. For now, consumers can enjoy lower borrowing costs, but they should also keep an eye on inflation and currency movements. What do you think? Should the RBI have waited longer before cutting rates, or was it the right move at the right time?

Meaningful Outreach in Tarn Taran, Punjab

In December 2024, I had the opportunity to conduct an outreach program in Tarn Taran, engaging with local taxpayers and understanding their concerns firsthand. Beyond the formal sessions, this visit became a deeply enriching experience, allowing me to connect with the people, their stories, and the vibrant cultural fabric of the region.

One of the most memorable moments was visiting the historic Gurudwara Sri Tarn Taran Sahib, a place of immense spiritual significance. Walking through its serene corridors, I found a moment of peace and reflection, appreciating the deep-rooted sense of faith and community that defines this town.

Interacting with local business owners, traders, and professionals, I gained insights into their challenges and aspirations. From discussions on tax compliance and procedural clarifications to conversations about the economic pulse of the region, the engagement reinforced the importance of such direct dialogue. Many taxpayers appreciated the initiative, emphasizing how such sessions help demystify tax laws and build trust between the administration and the people.

This visit was a reminder that tax administration isn’t just about policies and enforcement—it’s about understanding, educating, and supporting those who contribute to the country’s economy.

IT Firms Shift Away from H-1B Visas

For years, Indian IT companies have relied on the U.S. H-1B visa program to bring skilled workers to America. However, changes in immigration policies, especially under the Trump administration, have made this pathway uncertain. As a result, IT firms are now looking at alternative solutions like offshoring and nearshoring, setting up new talent hubs in countries such as Mexico, Argentina, and Brazil. But why is this shift happening, and what does it mean for the global workforce?

Why Are H-1B Visas Becoming Less Attractive?

The H-1B visa program has long been a popular route for companies needing highly skilled foreign workers, particularly in the tech industry. However, since 2017, stricter regulations and higher denial rates have made it more difficult for companies to secure these visas. In 2020, the then President Donald Trump temporarily suspended H-1B visas, citing the need to protect American jobs. He stated:

"We must first take care of the American worker. We cannot allow cheap foreign labor to flood our economy at the expense of hardworking citizens."

This move affected thousands of Indian IT professionals who were either waiting for visa approvals or hoping to move to the U.S. for work. Although the suspension was later lifted, companies realized they needed a more reliable, long-term solution rather than depending on a visa program that could be restricted at any time. Even though denial rates for H-1B visas declined in 2022, the unpredictability of the process has led major IT firms to look for alternative hiring models.

Recent Examples of Companies Adapting

Several top IT firms have adjusted their strategies to reduce reliance on H-1B visas. TCS and Infosys Expanding in Mexico – Tata Consultancy Services (TCS) and Infosys have ramped up hiring in Mexico and Canada to serve North American clients. Infosys, for instance, opened a Digital Innovation Hub in Calgary, Canada, creating 1,000 jobs in 2022. Wipro Investing in Brazil – Indian IT giant Wipro has significantly expanded operations in Brazil, where it has acquired local companies to strengthen its footprint. Cognizant's Nearshoring Approach – Cognizant, another major IT player, has been focusing on Latin America and Eastern Europe to build local talent pools. The company recently announced hiring 3,000 people in Mexico to support its U.S. operations. HCL Technologies in Eastern Europe – HCL Technologies has been investing heavily in Poland and Romania, where it can find skilled tech workers at lower costs than in the U.S.

The Rise of Nearshoring and Offshoring

To counter visa challenges, companies have adopted two key strategies: Offshoring – Moving jobs to countries like India and the Philippines, where labor costs are lower and a skilled workforce is readily available. Nearshoring – Setting up operations in Mexico, Argentina, and Brazil, where similar time zones make collaboration easier.

Why Latin America?

Latin America has emerged as a major tech hub for several reasons: Proximity to the U.S. – Time zone alignment improves collaboration. Large Talent Pool – Countries like Brazil and Argentina are producing thousands of skilled engineers and IT professionals. Cost Savings – Hiring developers in Latin America can be 30-40% cheaper than in the U.S.

Impact on the Global Workforce

This shift away from H-1B visas reflects a broader trend: the globalization of the tech workforce. Instead of relying solely on the U.S., companies are building decentralized teams across multiple regions.

Key Changes in the Job Market:

✅ More IT jobs in Latin America and Eastern Europe – Countries like Mexico, Argentina, and Poland are seeing a rise in high-paying tech jobs. ✅ Reduced dependence on U.S. immigration policies – Companies are less affected by visa restrictions. ✅ Increased competition for global talent – Salaries in emerging tech hubs are rising as demand grows.

Conclusion

The decline in H-1B visa approvals has forced IT companies to rethink their hiring strategies. By shifting to offshoring and nearshoring, they are overcoming visa challenges while creating a more globalized workforce. As Latin America emerges as a key tech player, the traditional model of relying on U.S. visas is fading. The future of IT hiring is no longer limited by borders—it’s a global game now.

DOJ Blocks HPE-Juniper Deal: Why It Matters

The U.S. Department of Justice (DOJ) has taken a firm stand against Hewlett Packard Enterprise’s (HPE) $14 billion acquisition of Juniper Networks, citing concerns over market competition. This move highlights the government's effort to prevent monopolistic behavior in the networking sector. But why is this deal so controversial, and what does it mean for businesses and consumers?

What’s the Big Deal?

HPE is a major player in enterprise networking, providing critical infrastructure for businesses and data centers. Juniper Networks is another significant competitor in the same space, known for its high-performance networking solutions. If HPE were to acquire Juniper, the DOJ argues that it would reduce competition, potentially leading to:

• Higher prices for businesses relying on networking equipment.
• Less innovation due to reduced market pressure.
• A duopoly where only two major players—HPE and Cisco—control most of the market.

This is a classic case of market concentration, where fewer firms dominate an industry, making it harder for smaller competitors to thrive.

Understanding Antitrust Concerns

Antitrust laws exist to keep markets competitive and protect consumers from unfair business practices. The DOJ intervenes when it believes a merger will create an unfair advantage or limit competition.

To put it simply: Imagine a town with three grocery stores. If one of them buys another, there are now only two choices left. Prices might go up, and customer service could decline because there’s less incentive to improve. The same logic applies to the tech world—if big companies absorb competitors, customers may face higher costs and fewer options.

The Cisco Factor

One of the DOJ’s main concerns is that the deal would leave only two dominant firms—HPE and Cisco—controlling the enterprise networking market. Cisco is already the industry leader, and with Juniper under HPE’s umbrella, these two giants would have an overwhelming market share. This could make it nearly impossible for smaller firms to compete.

Such a scenario is similar to the Boeing-Airbus rivalry in the aviation industry. With only two major players, airlines have fewer choices, leading to higher aircraft prices. A similar lack of competition in networking could drive up costs for businesses and government institutions relying on these technologies.

What Happens Next?

The lawsuit signals that regulators are willing to take a tough stance against big tech consolidations. If the DOJ succeeds in blocking the deal, HPE may have to reconsider its growth strategy, possibly looking at partnerships instead of outright acquisitions.

On the other hand, if HPE wins, the market could shift significantly, with Cisco and HPE controlling a vast share of the networking infrastructure sector. This could have ripple effects across industries that depend on reliable and affordable networking solutions.

Final Thoughts

The DOJ’s intervention in the HPE-Juniper deal underscores the importance of maintaining a competitive market. While big mergers can bring efficiency and innovation, they can also lead to monopolistic control that harms consumers in the long run.

For businesses and tech professionals, this case is a reminder of how regulatory actions shape the industry.

The Popcorn Tax Structure: A Case of Economic Complexity

Taxation policies often serve as a reflection of broader economic principles, balancing revenue generation with consumer affordability. The recent implementation of a tiered Goods and Services Tax (GST) structure for popcorn highlights the complexities involved in tax classification and its implications for different consumer groups.

The Three-Tiered Tax System for Popcorn

The GST rates on popcorn vary depending on its form and level of processing, creating three distinct tax brackets:

1. Loose, unpackaged salted or spiced popcorn – 5% GST
   This category includes popcorn sold without packaging, often by street vendors or in local markets. The lower tax rate appears to be a policy decision aimed at maintaining affordability for lower-income consumers, ensuring access to an inexpensive snack.

2. Pre-packaged and labeled popcorn – 12% GST
   Microwaveable popcorn and other pre-packaged varieties attract a higher tax rate of 12%. This classification follows a broader pattern where processed and packaged foods are taxed more than their fresh or loose counterparts, aligning with regulatory norms that distinguish between staple goods and convenience products.

3. Caramelized popcorn – 18% GST
   Caramel popcorn, due to its added sugar content, falls under the category of confectionery and is therefore taxed at the highest rate of 18%. This follows the principle that luxury or discretionary food items—often containing additional ingredients like sugar—are taxed at higher rates to discourage excessive consumption and to generate additional revenue.

Economic Rationale Behind the Differentiation

This taxation framework follows key principles in microeconomics and public finance. The structure reflects elements of progressive taxation, wherein goods considered essential or commonly consumed by lower-income groups attract lower tax rates, while more processed or premium variants face higher taxation.

Several economic justifications can be inferred:

• Consumer Welfare Considerations: The lower tax rate on loose popcorn helps ensure affordability for a wider population, particularly those in lower-income brackets. By contrast, higher taxation on pre-packaged and caramelized popcorn targets consumers with greater purchasing power.

• Distinction Between Essentials and Luxuries: Governments often differentiate between basic necessities and discretionary items when formulating tax policies. Loose popcorn is perceived as a simple snack, whereas caramel popcorn, with added ingredients, is considered a non-essential indulgence.

• Revenue Generation and Public Health: The higher tax rate on caramelized popcorn aligns with policies aimed at discouraging excessive sugar consumption, a common concern in public health discourse. Similar tax measures exist for products like sugary beverages and confectionery items.

Challenges and Criticism

Despite the economic rationale, this classification has led to significant debate and criticism. The distinctions, while theoretically sound, introduce administrative complexity and potential inefficiencies:

1. Ambiguity in Classification: The fine line between different categories creates room for interpretation and potential disputes. For example, does lightly sweetened popcorn qualify as caramelized, or does it fall into the regular pre-packaged category? Such grey areas often lead to compliance challenges and legal disputes.

2. Market Distortions: Differentiated taxation can influence consumer behavior in unintended ways. If pre-packaged popcorn is taxed at 12%, but loose popcorn is only taxed at 5%, some consumers might shift towards the latter purely to avoid higher costs, even if it is less convenient or standardized.

3. Disproportionate Impact on Businesses: Small and medium-sized enterprises (SMEs) dealing in packaged snacks may face higher compliance costs and reduced competitiveness due to the increased tax burden, whereas informal street vendors benefit from lower tax obligations.

Final Note

While the rationale behind differential tax rates is grounded in economic theory—considering affordability, consumer behavior, and public health—it also raises concerns about administrative complexity and market distortions.

For policymakers, the challenge lies in balancing revenue generation with fairness and efficiency.

AI’s Energy Disruption: A Game Changer?

For years, the rise of artificial intelligence (AI) has been linked to skyrocketing energy demands. Data centers worldwide have been consuming massive amounts of electricity to power AI models, leading to concerns about energy shortages and higher infrastructure costs. But what if this assumption is no longer valid?

DeepSeek, a Chinese AI startup, has just introduced the R1 model, an energy-efficient AI system that could disrupt the entire energy industry. This breakthrough challenges the traditional narrative that AI development will require an ever-expanding power grid. So, what does this mean for the future of energy? Let’s break it down.

AI’s Energy Revolution: What’s Different?

Traditional AI models, particularly large-scale ones, require enormous computing resources. Think of AI training as an elite athlete preparing for the Olympics, it takes time, effort, and most importantly, a lot of energy. Nvidia GPUs, specialized hardware, and cooling systems all contribute to AI’s heavy electricity consumption.

But DeepSeek’s R1 model operates 10 to 40 times more efficiently than comparable U.S. AI systems. It requires only 2,000 Nvidia chips and less than $6 million worth of computing power far less than its competitors. This means significantly lower energy consumption, shaking up predictions about the future of AI-related electricity demand.

How This Affects the Energy Industry

DeepSeek’s innovation could have ripple effects across multiple sectors, from data centers to power grids and even natural gas markets.

1. Data Centers: No Need for Massive Expansion?

Tech giants like Google, Microsoft, and Amazon have been investing billions in expanding their data center infrastructure, assuming AI’s growth would require more energy. But if AI models become drastically more efficient, these expansion plans might not be necessary. Companies could achieve the same results with far less energy, reducing infrastructure costs.

2. Power Grids: Less Pressure, Fewer Upgrades

With AI models consuming less electricity, power grids might not need extensive upgrades to handle expected demand. This could delay or even eliminate costly grid expansion projects, saving billions for utility companies and governments.

3. Natural Gas Demand: A Sudden Drop?

Many analysts predicted that natural gas would play a key role in meeting AI’s energy needs. But if AI’s energy consumption is much lower than expected, natural gas demand might not rise as forecasted. This uncertainty has already triggered a sell-off in energy stocks, as investors reassess the future of power generation.

The Bigger Economic Picture

From an economics perspective, this is a classic case of technological innovation disrupting market expectations. When firms and governments plan infrastructure projects, they rely on forecasts demand projections, energy consumption trends, and investment cycles. If those forecasts suddenly change, it creates inefficiencies and financial losses.

For example, consider the concept of sunk costs. Many energy companies have already invested heavily in power generation projects assuming high AI-related demand. If that demand doesn’t materialize, those investments become less valuable, leading to potential financial instability.

Similarly, opportunity costs come into play. If companies no longer need to spend billions on expanding energy infrastructure, they can allocate resources elsewhere perhaps into developing better AI software, improving renewable energy, or advancing semiconductor technology.

What’s Next?

DeepSeek’s R1 model is just the beginning. If other AI companies follow suit, the energy industry will need to rethink its long-term strategies. Instead of building more power plants and data centers, firms might shift toward optimizing existing resources.

However, there are still questions to answer:

 Will other AI models achieve similar energy efficiency?

How will energy companies adjust their investment strategies?

 Could this innovation lead to lower electricity prices for consumers?

One thing is certain, DeepSeek has upended the assumptions driving energy policy and infrastructure planning. As AI becomes smarter and more energy-efficient, we might be witnessing a major shift in the global energy economy.