Indian IT Sector Faces Continued Challenges in Fiscal 2026

Weak Spending and Demand Signals Prolonged Slowdown

India’s information technology sector is unlikely to see a recovery in fiscal 2026 as discretionary spending remains weak. Accenture, a key industry bellwether, has warned that client budgets show no signs of significant increases, affecting overall demand.

Global Trade Tensions and U.S. Market Slowdown

Rising trade tensions, particularly after new U.S. tariffs, have fueled concerns about a potential economic slowdown in the country. The U.S. remains a crucial market for Indian IT firms, and uncertainty surrounding client spending is expected to impact revenue growth.

Market Performance and Financial Outlook

India’s IT index has declined by 15.3% this year, marking its worst quarter since mid-2022. Leading companies, including TCS, Wipro, Infosys, and HCLTech, have faced losses ranging between 11.2% and 18.1%. Analysts predict a modest 4% revenue growth for fiscal 2026, in line with 2025 figures, as weak demand and fewer mega deals continue to affect performance.

Impact of AI and Sector-Specific Trends

The early stages of generative AI adoption present additional challenges, with companies experiencing headwinds in implementation. While banking, financial services, insurance, and healthcare have shown some recovery, overall client sentiment remains cautious, with businesses adopting a wait-and-watch approach.

Competitive Landscape and Future Risks

Accenture has flagged delays and cancellations of contracts in the U.S. due to recent policy changes. Although Indian IT firms have limited exposure to these disruptions, increased competition in other segments could pose new challenges.

“Indian IT Sector Faces Continued Challenges in Fiscal 2026”