Archive · 22 Aug 2026
AI Volumes Could Outweigh Revenue Pressure for India’s IT Sector
A report says artificial intelligence may eventually help India’s IT services companies grow.
At first, AI could make some work faster and cheaper, which may reduce how much companies charge clients.
This could put pressure on revenue in the short term.
However, AI may also create many new projects and increase the amount of technology work being done.
The report says these new AI-related projects could outweigh the early pressure by FY30.
Growth could become stronger around FY28 and reach mid- to high-single digits by FY31.
Companies are already seeing healthy orders in some areas, especially cost-saving projects.
But weak economies, lower optional spending and strong competition could still slow growth.
CLSA said AI could become a long-term growth driver for India’s IT services industry.
AI may initially reduce revenue as productivity gains are passed on to clients, but volumes could outweigh deflation by FY30.
CLSA expects US-dollar industry revenue growth to reach mid- to high-single digits by FY31.
Generative AI’s share of overall IT services spending is expected to double to 11% by 2029.
Near-term risks include weak discretionary demand, geopolitical uncertainty, rising competition and pressure from global capability centres.
- Who
- CLSA analyzed the outlook for India’s IT services industry, citing estimates from IDC.
- What
- The report assessed whether AI-driven demand will outweigh revenue pressure caused by automation and productivity gains.
- When
- The assessment was reported on August 22; it projects developments through FY30, FY31 and 2029.
- Where
- India’s IT services industry, which serves global companies.
- Why
- AI may create new technology demand and higher volumes, although automation, weak discretionary spending and other pressures could weigh on near-term revenue.
Near-Term Risks
Long-Term Opportunities
AI’s revenue impact
Near-Term Risks
Automation and productivity gains could reduce revenue if savings are passed on to clients.
Long-Term Opportunities
New AI-related projects and higher volumes could eventually more than offset that revenue pressure by FY30.
Industry demand
Near-Term Risks
Weak macroeconomic conditions, softer discretionary spending, geopolitical uncertainty and global capability centres could restrain growth.
Long-Term Opportunities
Healthy order-book growth, cost-saving work, vendor consolidation and improving revenue per employee indicate resilience.
Share of AI spending
Near-Term Risks
IT services companies risk losing part of global AI spending to hardware and software providers.
Long-Term Opportunities
Generative AI spending is expected to expand sharply, creating additional demand for AI-related services, applications and platforms.
- Long-term AI outlook
- CLSA expects AI eventually to become a net growth driver for India’s IT services industry.
- Revenue pressure
- AI could initially compress revenue as productivity gains are passed on to clients.
- FY30 expectation
- AI-related volumes could outweigh revenue deflation by FY30.
- FY31 revenue growth
- Industry US-dollar revenue growth is expected to reach mid- to high-single digits by FY31.
- Generative AI spending
- Generative AI’s share of overall IT services spending is expected to double to 11% by 2029.
- Potential growth inflection
- CLSA identifies the next 18–24 months as a possible industry inflection period, with FY28 potentially important for stronger growth.
- Current demand
- Most companies covered by CLSA reported healthy year-on-year order-book growth, aided by cost-saving and vendor-consolidation deals.