Nitin Bhatt, technology sector leader at EY India, stated on Thursday that while the recently announced 25% US tariffs on goods do not directly affect the Indian IT services sector, the repercussions could be “substantial” as rising input costs may cause US companies to reduce their discretionary tech spending.
The introduction of the tax comes as the export-driven Indian IT sector is battling the emergence of artificial intelligence (AI) and macroeconomic uncertainty.
“While the Indian IT services sector isn’t directly hit by the newly announced 25% US tariffs, the ripple effects could be substantial. Rising input costs may prompt US companies to scale back discretionary tech spending. Simultaneously, growing unease around workforce mobility and evolving digital taxation frameworks could redefine how cross-border services are priced and delivered,” Bhatt said.
Businesses will be better equipped to dominate in a more fragmented and unpredictable global market, Bhatt noted, as well as to withstand demand volatility, if they shift to hybrid delivery models, diversify geographically, and integrate AI at scale.
The biggest provider of IT services in India, TCS, plans to lay off more than 12,000 workers this year, or 2% of its global workforce, as part of a larger plan to become a “future-ready organization” that prioritizes workforce realignment, market expansion, AI deployment, and technology investments.
According to market observers, TCS’s layoffs may cause new shakes in the tech sector.
The major IT services providers in India achieved single-digit revenue growth in Q1FY26, ending a rather depressing June quarter in which geopolitical tensions and financial volatility hampered global tech demand and postponed customer decision-making.
K Krithivasan, the MD and CEO of TCS, has stated that the firm is going through a “demand contraction” as a result of ongoing macroeconomic and geopolitical uncertainty. He also stated that he does not anticipate double-digit revenue growth in FY26.
Krithivasan noted that the decision-making delays from the previous quarter had “intensified” at this point. He anticipated that discretionary spending, which is a key driver of revenue growth for IT businesses, would resume once the uncertainty subsided.
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