A recent estimate by Deloitte India puts India's GDP growth in 2025 at around 6.8%, lower than what the country saw in the past year. To ensure India Inc.—a primary driver of GDP growth—can recover and push the growth numbers even higher, the report notes that it will be key to evolve with the global landscape and look at building more resilient practices.

However, what's often overlooked is the critical impact of labour market shifts.  The SHRPA State of HR Industry Report 2024 reveals that 670 Indian CXOs and HR leaders, growing talent and labour concerns is a top factor shaping their 2025 business outlook, even surpassing concerns like inflation, impact of fiscal policies and access to foreign capital.

 

Challenges Shaping HR’s Strategic Role in 2025

 

This rise in the importance of talent also points to its role as a key differentiator between competitors. But in an evolving ecosystem, tech and business disruptions impact the very fundamentals of HR. On average, more than 9 in 10 leaders say that attracting the right talent, building the right leaders, and maintaining high productivity are key challenges. Solving these would create the highest impact on business performance in 2025.

In addition to talent management challenges, HR tech identification, implementation, and adoption emerge as key areas of concern for both CXOs and HR leaders alike. The fact that 9 in 10 leaders state that overcoming adoption challenges of newer HR technologies like AI and automation will create the highest business impact shows the opportunity for HR to spearhead impact. The strategic importance of HR today will be driven by its ability to adopt technological advancements in raising business performance and building a resilient and agile workforce.

 

HR Tech Maturity is Failing to Keep Up

 

In response to these challenges, HR leaders are scaling their practices, strengthening their focus on EX, becoming more agile and aligning closely with business objectives, the ability to embrace newer technologies and embed powerful solutions into their talent execution efforts is a miss. Across different change execution parameters that the report assessed, the highest dissatisfaction among HR leaders center around enhancing productivity through AI (48%) and executing digital transformation initiatives successfully (32%).

 

We see challenges emerge in key areas across both tech and talent areas, shaping HR’s role in 2025. But it’s important to remember that in a dynamic and evolving environment, these challenges will take on newer dimensions, further accentuating business demands for their HR function.


But for most, the problem runs far deeper. 7 in 10 companies in India are at a low HR tech maturity stage, further accentuating the gaps in their effectiveness and impact. Adopters with just data-driven HR tech capabilities and Laggards who solely depend on basic HR automation fall behind Progressive companies with integrated HR systems and advanced AI and analytics capabilities.



Those who are ahead in the HR tech maturity curve can drive more impactful initiatives and execute change in a disruptive and evolving ecosystem with greater success. The distance between companies with advanced HR tech suites and those still sticking with basic and often archaic technology solutions will only widen in an era that will see AI and analytics—diagnostic and predictive—become more ingrained in their talent function.

 

Rising Investments Won't Paper Over Cracks

 

Tech investments are going to rise across strategic areas. Despite cost constraints, companies in India are planning to raise investment levels in key areas. A growing demand, accentuated by the skills gap in the country, for talent development will see the largest growth in tech investments followed closely by technologies that help HR identify and retain talent.

Looking at the HR tech ecosystem, the State of the HR Industry report for India saw that major innovation areas are in alignment with the focus areas for HR in 2025.



Yet the intent to invest without a focus on addressing underlying issues that negatively impact the results of HR tech will only create further doubt in business and HR on tech efficacy. If key issues that hamper tech impact aren't overcome, the rising investments in the coming year might prove ineffective. And what are these underlying issues?

According to the State of the HR Industry report for India, these issues emerge due to the mismatched expectations between HR and their tech partners across both selection and implementation stages.

Similar to larger trends from Asia Pacific and the Middle East, these challenges significantly affect HR's ability to create the necessary impact through tech usage. It further impacts HR's ability to create justifies investments and brings different stakeholders together to address the low HR tech maturity stage that most companies find themselves in.


Driven by external pressures to deliver, HR will raise investment in 2025 across strategic areas. But this intent alone would do little to address the challenges that await HR in the coming year. HR needs to focus on a broader strategy for moving ahead the HR tech maturity curve that is sustainable and responsible to business needs. This will require bringing together business stakeholders, leading change management overcoming selection and implementation gaps, and creating more value.

And by the looks of it, HR leaders are already aware of the problems. And 2025 will see this awareness translate into action.

A Move Back to First Principles

For HR leaders, it's necessary to go back to first principles. Understand the business's problem statements and then find the right strategy and technology that will address the problems. HR tech is not the panacea for all ailments but a strategic enabler and accelerator of success.




The focus on aligning business, talent, and tech strategy better will require both HR and their HR tech partners to play a more active role. This will mean going back to the drawing board and and with each step to move ahead in the HR tech maturity stages, aligning it business imapct and objectives. The rush to adopt newer technologies need to be tempered with it's impact on business performance.

But at the same time, it is critical to ensure companies—and by extension HR—are not falling behind. We have seen that a mature tech architecture helps HR deliver a better impact across all key talent areas. With the need to attract, develop and retain employees only growing in 2025, a closer focus on aligning tech, talent, and business strategies will be essential for HR.