On Tuesday, information technology industry body Nasscom projected a flat pace of growth for India’s tech services sector in the coming fiscal years. The previous day, brokerage firm Jefferies reduced its target prices of India’s Big Four IT firms. All of this adds to growing concerns around how the sector is preparing to navigate the onslaught of artificial intelligence.
But are these fears justified? How ready are India’s IT firms for AI, really? Mint explains.
What did Nasscom say about IT services and AI?
Nasscom’s annual strategic review for FY26 said India’s tech services firms are set to report 6% annualized revenue growth. While this would be the fastest growth in three years, Nasscom said the impact of AI is real, and the pace of growth could remain flat for tech outsourcers over the next two to three years at least.
Fresher hiring by IT services firms, one of India’s largest mass recruiters, is also projected to remain flat as automation changes the face of tech-related jobs in India. This could deliver mixed fortunes for IT services in the near term.
Do the heads of IT firms agree?
The day Nasscom published its review, C Vijayakumar, chief executive of HCL Technologies, said AI would lead to a “painful transition” because of its impact on people and jobs.
The chairpersons of Tata Consultancy Services (TCS), Infosys and HCLTech, however, have refuted such claims. N Chandrasekaran, chairman of Tata Sons, said AI could be a big opportunity for knowledge workers, while Infosys chairman Nandan Nilekani told investors on 17 February that AI’s impact was overblown. Roshni Nadar-Malhotra, chairperson of HCLTech, echoed these views, saying the sector had “seen such transitions many times before”.
How have these developments affected the sector?
Since 1 January, IT stocks have been in free fall. As of 16 February, the sector had lost nearly $45 billion in market cap. Many of them recovered slightly on Wednesday after comments from Anthropic hinted at partnerships with tech and software firms, prompting a reversal in the fortunes of US tech stocks and causing India’s top six IT stocks to rise 1-3%. TCS and Infosys signed partnerships with OpenAI and Anthropic last week.
Is there a dearth of large AI deals for IT firms?
Yes, and this is a key pain point for IT companies. On Tuesday Babak Hodjat, chief AI officer of Cognizant, which is larger than Infosys by revenue, said multi-year, large-value tech deals from clients could be a thing of the past because of the pace of AI innovation. Analysts believe AI’s rapid changes are fuelling uncertainty among companies on deploying the technology, limiting AI deals mostly to pilot projects.
That said, AI revenue is rising. Accenture reported ‘advanced AI’ revenue of $1.1 billion in FY25, while TCS said in December that it earned $1.8 billion in annualized revenue from AI.
Is the sector unprepared for AI?
It’s too soon to deliver a definitive verdict. However, most stakeholders believe AI-led automation of various tech-related work will definitely have a detrimental impact on large deals, revenue growth and headcount addition across India’s IT services sector.
Companies are putting up a brave face, saying that no enterprise will deploy AI-based tech by itself, and will need IT services firms for backward compatibility and compliance, among other things. For now, they are partnering with top AI companies worldwide, which means they could stabilize after two to three years, by which time AI itself will likely be more mature.