TLDR: The Indian IT services industry faces significant challenges from the rapid advancements in Artificial Intelligence, a global economic slowdown, and impending reforms to US visa policies. US Commerce Secretary Howard Lutnick has indicated a major overhaul of the H-1B and green card systems, while AI-driven efficiencies are leading to steeper rate cuts and impacting deal wins. The industry, however, believes it is resilient enough to withstand these pressures.
The Indian information technology (IT) services industry is currently navigating a complex landscape marked by the transformative rise of artificial intelligence (AI), a persistent economic slowdown, and the prospect of tightening US visa regulations. These converging factors are creating a period of significant flux for the sector, which heavily relies on international markets, particularly the United States.
One of the most pressing concerns stems from the United States, where Commerce Secretary Howard Lutnick has signaled a comprehensive overhaul of the country’s visa programs. In an interview with Fox News, Lutnick stated his involvement in revamping the H-1B visa system and the green card process, remarking, “We’re going to change that programme because that’s terrible, right? We’re going to change the green card… That’s the gold card that’s coming.” This announcement comes as the Indian IT industry has been in a “wait-and-watch mode” following the return of US President Donald Trump, whose administration has historically favored stricter immigration policies. Despite the potential for increased restrictions, industry players and senior executives express a degree of confidence, believing the sector has grown “much bigger to get rattled by the visa issue.”
Simultaneously, the disruptive force of Artificial Intelligence is reshaping the operational and financial dynamics of the IT services sector. AI-driven efficiency gains are increasingly impacting deal wins and leading to steeper rate cuts, compelling companies to adapt their service delivery models. The high-tech vertical, in particular, is prioritizing investments in AI-related capital and operational expenditures, while simultaneously seeking to optimize current spending by reallocating resources towards AI initiatives.
Adding to these pressures is a broader economic slowdown, exacerbated by new trade policies. The imposition of an additional 25% tariff by US President Donald Trump is seen as a “double whammy” for India’s IT sector. Phil Fersht, CEO of US-based HfS Research, described these tariffs as the “new IT services wrecking ball.” He explained that while services are not directly taxed, the tariffs are expected to stoke inflation in the US, forcing American firms to tighten discretionary spending. This, in turn, is projected to lead to cuts in consulting and IT outsourcing contracts, particularly affecting manufacturing, logistics, and retail verticals. Such a tariff-fueled downturn in the US economy, which accounts for over half of India’s $190 billion annual software export revenues, directly crimps Indian software export growth.
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Furthermore, the evolving US visa policies, including increased visa fees, mandated in-person interviews starting in 2025, and new surcharges, have reportedly tripled costs for Indian applicants. Experts warn that such restrictive policies could lead to a talent shortfall in critical technology sectors like AI and semiconductors within the US, potentially undermining its competitive edge, as Indian professionals have historically played a pivotal role in these areas.
