TLDR: A recent Kotak Institutional Equities report reveals that India’s Business Process Outsourcing (BPO) exports are growing faster than IT services and are set to maintain this lead through FY2026. The global BPO market is projected to reach $268 billion by 2029, with India contributing significantly. Generative AI is identified as a key factor, presenting both opportunities in data services for LLMs and potential disruptions to traditional BPO models.
A new report from Kotak Institutional Equities, released on August 24, 2025, highlights a significant shift in India’s outsourcing landscape: the Business Process Outsourcing (BPO) sector is now outpacing traditional Information Technology (IT) services in export growth and is projected to sustain this momentum through Fiscal Year 2026. This robust performance positions India as a dominant force in the evolving global outsourcing ecosystem.
The global BPO industry is forecast for substantial expansion, with projections indicating a market size of USD 268 billion by 2029, growing at a Compound Annual Growth Rate (CAGR) of 3.9% from 2024. India plays a pivotal role in this growth, with its BPO exports currently valued at USD 45 billion, accounting for approximately 20% of the total global outsourced spending. Between FY2015 and FY2025, Indian BPO exports demonstrated an impressive CAGR of 7.8%, outperforming global outsourcing growth by 250–300 basis points.
This acceleration is primarily driven by global companies’ intensified focus on cost optimization, an increasing trend towards outsourcing various business functions, and a growing preference for offshore delivery models. Indian service providers contribute significantly, making up about two-thirds of the nation’s BPO exports. These providers are increasingly adopting leaner cost structures and outcome-based engagement models, enhancing their competitive edge and expanding their market share.
The report also delves into the transformative impact of Generative Artificial Intelligence (Gen AI) on the BPO sector, describing it as both a ‘catalyst and a challenge.’ While Gen AI is expected to unlock further productivity gains and reshape service delivery, it also introduces potential disruptions to existing business models. However, it simultaneously creates significant new opportunities for Indian BPOs, particularly in specialized areas such as data annotation, data collection, and data curation services. These functions are crucial for training large language models (LLMs), establishing a fast-growing segment for India’s outsourcing providers.
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In contrast, while the IT services sector remains a vital contributor to India’s export economy, its growth is comparatively slower. Crisil Ratings forecasts a 6% to 8% expansion for IT services in 2026. The broader IT-BPM sector in India recorded a combined export revenue of approximately USD 194 billion in FY 2023, with total revenues nearing USD 254 billion. However, consultancy figures from Everest Group indicate that the BPM sector is projected to grow at 4.5–5% in 2025, compared to 1.5–2% for IT services, underscoring the BPO sector’s current lead in growth trajectory.
