Mumbai, Jun 1 (IANS): There will be a 2 per cent drop in the Indian government's IT spending this year due to demonetisation and a drop in industrial production, market research firm Gartner said on Thursday.

The government is forecast to spend $7.8 billion on IT in 2017 -- a 7.5 percent increase from 2016. However, this is down from Gartner's projection of 9.5 percent growth this year.

"The 2 percent revision in our outlook is primarily due to the effects of demonetisation and a drop in industrial production," Moutusi Sau, principal research analyst at Gartner, said in a statement.

"However, spending plans like affordable housing scheme and increased loans to small and medium enterprises by the government are likely to have a positive effect on IT spending in the next few quarters," Sau added.

IT services (which includes consulting, software support, business process outsourcing, IT outsourcing, implementation and hardware support) is expected to grow 10.8 per cent in 2017 to reach $2 billion, making it the largest IT spending category.

The software segment is expected to grow 10.8 per cent in 2017 to reach $1.1 billion.

Enterprise resource planning (ERP), supply chain management (SCM) and customer relationship management (CRM) will be the fastest growing segment with 14.5 per cent growth.

Devices (which includes printers/copiers/MFPs, mobile devices, PCs and tablets) is expected to grow 10.4 per cent this year to reach $1.1 billion.