TLDR: CareEdge Ratings projects a flat revenue growth of 0-2% for India’s Information Technology (IT) sector in the fiscal year 2026 (FY26) in constant currency terms. This subdued outlook is attributed to persistent macroeconomic uncertainties, client spending constraints, and delays in discretionary projects. Despite these challenges, the sector is investing in emerging technologies like AI and maintaining a healthy deal pipeline.
New Delhi, India – The Indian Information Technology (IT) sector is anticipated to experience a modest revenue growth of 0-2% year-on-year in constant currency terms for the current financial year (FY26), according to a recent report by CareEdge Ratings. This forecast reflects a period of muted expansion, primarily driven by ongoing macroeconomic uncertainties and cost pressures that are influencing client spending across various sectors. The report highlights that the IT industry has been grappling with a slowdown, as clients are increasingly delaying or deferring discretionary projects, contributing to a weak demand environment.
However, despite these headwinds, the sector demonstrates resilience. CareEdge Ratings notes a healthy deal pipeline that is expected to convert into actual wins in the near term, providing some revenue visibility for the upcoming quarters. Indian IT companies are strategically investing in key areas to remain competitive and meet evolving client demands. These critical investment domains include cloud transformation, data analytics, generative AI, cybersecurity, engineering research and development (ER&D), ESG initiatives, and machine learning.
Tanvi Shah, Senior Director, CareEdge Analytics and Advisory, stated, “Indian IT sector is expected to sustain its revenue growth at ~3%-5% in absolute terms in FY26 driven by deal wins which might provide revenue visibility. The operating margins are expected to remain range bound in FY26. However, global uncertainties and US tariffs related developments are key monitorable.” This quote underscores the importance of deal conversions and the watchful eye on global economic shifts.
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The Information Technology and Information Technology-Enabled Services (IT/ITES) sector is pivotal in solidifying India’s position as a preferred global investment destination. The increasing pace of digital adoption and the growing demand for advanced technologies such as 5G, advanced data analytics, artificial intelligence, cloud computing, cybersecurity, robotics, and blockchain present robust long-term growth opportunities for Indian IT firms. Nevertheless, a significant concern flagged by the report is the rising uncertainty in the US market, which remains India’s largest market for IT exports. Any shifts in US policies, tariffs, or market movements could directly impact the performance of Indian IT companies, given that a substantial portion of their revenue is derived from this region. The report also mentions global tariff and geopolitical pressures as contributing factors to the muted growth.
