India’s IT industry is heading for a challenging year due to U.S. tariff hikes that could trigger inflation and cut client spending.
Although the tariffs aren’t directly on IT services, Indian firms will still be affected as their major U.S.-based clients in manufacturing, logistics, and retail tighten budgets. This is likely to slow down deal closures, delay ongoing projects, and impact revenue growth.
Financial firms like Bernstein and ICICI Securities have already downgraded their ratings on the Indian IT sector, signaling tough times ahead.
The U.S. remains the largest market for Indian software exports, accounting for over 50% of the $190 billion exports. Any economic uncertainty or reduced spending in the U.S. significantly affects Indian IT.
President Trump’s new tariff plans have increased the risk of a U.S. recession, with J.P. Morgan raising the chances to 60%. If that happens, analysts warn that the 2026 financial year may see little or no growth for Indian IT firms.
Companies that rely heavily on discretionary spending — extra, non-essential technology services — are expected to be hit the hardest. These include several large-cap and mid-cap Indian IT firms that had been growing fast in recent years.
BNP Paribas analyst Kumar Rakesh expects the effects of the slowdown to become visible by the September quarter.
The road ahead looks uncertain for the Indian IT job market.
