ICRA Sees 2–3 per cent Growth for IT Sector in FY26

04 Jul 2025 CW Team

Credit rating agency ICRA has maintained a stable outlook for the Indian IT services industry, projecting a modest revenue growth of 2–3 per cent in US dollar terms for FY2025–26. This is slightly below the 2.9 per cent growth recorded in FY2024–25.

The forecast is based on an analysis of 15 leading IT firms, including TCS, Infosys, Wipro, HCL Technologies, and Tech Mahindra, which together account for nearly 60 per cent of the industry's revenue. Despite recent gains in operating income, the sector’s earnings momentum is expected to remain weak due to uncertainties stemming from the recent imposition of US tariffs.

According to ICRA, the US and Europe continue to dominate the revenue share of Indian IT services firms, comprising 80–90 per cent of total industry turnover. These regions showed moderate performance throughout FY25, with a slight contraction in the final quarter. The outlook for Q1 FY26 remains cautious, as tariff-linked uncertainty may delay IT spending in key markets.

Hiring activity in the sector is also likely to stay muted until demand conditions improve. However, demand for skilled professionals in areas like artificial intelligence (AI) and generative AI (GenAI) is expected to influence future recruitment plans, particularly in the latter half of the year.

ICRA also pointed to the India–UK Free Trade Agreement (FTA) as a potential positive development. The agreement includes a key provision exempting Indian employees and their UK-based employers from paying social security contributions for up to three years. Though the direct financial impact may be limited, the exemption is expected to enhance workforce mobility and strengthen business ties between the two nations.

Overall, while the Indian IT sector remains resilient, headwinds from global economic conditions and shifting trade dynamics are likely to keep near-term growth in check.

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