India IT services growth to stay muted in FY27, FY28 amid AI disruption
Synopsis
Crisil Ratings has put a number on what IT boardrooms are quietly dreading: two more years of muted growth. With AI eroding the traditional revenue model, hiring frozen, and the rupee tailwind set to fade by FY28, India's IT sector faces its most structurally complex slowdown in a decade — and mid-tier agility may not be enough to offset it.
Key Takeaways
India's IT services sector revenue growth is set to remain muted through FY27 and FY28 , extending a four-year slowdown , per Crisil Ratings .
AI-native solutions are intensifying pricing pressure and triggering deal renegotiations across the industry.
A 5–7 per cent rupee depreciation will support margins in FY27, but this tailwind is expected to fade in FY28.
Operating margins are projected at 22–23 per cent in FY27 but may narrow thereafter as costs rise and forex support moderates.
Net headcount addition is expected to stay muted in both fiscals as firms shift to automation and AI-skill-focused hiring.
Credit profiles are expected to remain stable, backed by low debt and healthy liquidity across major players.
India's information technology (IT) services sector is headed for a prolonged revenue slowdown, with growth expected to remain muted through FY27 and FY28, as artificial intelligence (AI)-driven disruptions, weak discretionary spending, and persistent geopolitical uncertainties compound a four-year deceleration, according to a Crisil Ratings report released on Thursday, 16 July.
What the Report Found
The Crisil Ratings analysis flags a structural shift underway in how clients engage with IT vendors. Rising adoption of AI-native solutions is intensifying pricing pressure, triggering deal renegotiations, and slowing execution timelines as enterprises reassess technology budgets. Demand weakness in the United States and Europe — the two largest export markets for Indian IT — continues to suppress revenue visibility.
'AI is no longer just a productivity lever for IT services companies; it is beginning to challenge their traditional revenue model,' said Anuj Sethi, Senior Director at Crisil Ratings. 'Weak discretionary spending and uncertainty in the US and Europe continue to weigh on demand. This will keep revenue visibility modest over the near term,' he added.
Mid-Tier Companies and the Currency Tailwind
Mid-tier IT firms could prove more agile in navigating this environment, the report noted, given their ability to pivot faster to newer service lines and AI-adjacent offerings. For the broader industry, the critical test will be how quickly companies reinvent business models and expand into emerging service categories.
A 5–7 per cent depreciation in the rupee is expected to support revenue growth and operating profitability in FY27, but that tailwind is likely to fade by FY28 as forex support moderates. Overall revenue growth for mid-tier players is projected to hold at high single-digit levels over both fiscals, though the subdued broader outlook is expected to temper momentum.
Hiring Outlook and Margin Pressures
The hiring landscape is also being reshaped by AI-led disruptions. Net headcount addition across the sector is expected to remain muted in FY27 and FY28, as companies prioritise margin defence and productivity improvement over workforce expansion. Automation, higher employee utilisation, and selective hiring for AI-specific skills are identified as the key levers.
'Prudent resource management and currency tailwinds should help the sector sustain healthy operating margins of 22–23 per cent this fiscal. But that cushion could narrow from next fiscal as revenue pressures persist, talent costs rise, AI investments continue and forex support moderates,' said Aditya Jhaver, Director at Crisil Ratings.
Credit Profiles and Broader Risks
Despite the growth headwinds, credit profiles across the sector are expected to remain stable, underpinned by robust balance sheets, low debt levels, and healthy liquidity. This is notably the fourth consecutive year in which the sector's growth trajectory has disappointed relative to pre-pandemic benchmarks.
The sector remains exposed to heightened uncertainty from AI disruptions even as geopolitical and macroeconomic headwinds continue to constrain demand in key export markets. How quickly Indian IT firms can transition from volume-led to value-led models will determine whether the slowdown extends into a fifth year.
Point of View
It is a business-model stress test. The rupee tailwind is a one-year reprieve, not a solution. If large-cap IT cannot demonstrate AI-led revenue expansion by FY28, the sector's premium valuations will face a reckoning that cost-cutting and margin management cannot defer indefinitely.
NationPress
16 Jul 2026
Frequently Asked Questions
Why is India's IT services sector growth expected to stay muted in FY27 and FY28?
Growth is expected to remain muted due to a combination of AI-driven disruptions challenging traditional revenue models, weak discretionary spending from clients in the US and Europe, and ongoing geopolitical uncertainties. Crisil Ratings flagged these as compounding factors deepening a four-year slowdown.
How is AI disrupting the Indian IT services industry?
AI-native solutions are intensifying pricing pressure, triggering deal renegotiations, and slowing project execution as clients reassess technology spending. According to Crisil Ratings, AI has moved beyond being a productivity tool and is now directly challenging the traditional billing and revenue models of IT services firms.
What is the hiring outlook for India's IT sector in FY27 and FY28?
Net headcount addition is expected to remain muted across both fiscals. Companies are focusing on automation, higher employee utilisation, and selective hiring for AI-related skills rather than broad-based workforce expansion, as per the Crisil Ratings report.
What operating margins can Indian IT companies expect in FY27?
The sector is projected to sustain operating margins of 22–23 per cent in FY27, supported by prudent resource management and a favourable rupee. However, Crisil Ratings warned that this cushion could narrow from FY28 as revenue pressures persist and AI investment costs rise.
Are mid-tier IT companies better placed than large-cap firms in this environment?
The Crisil Ratings report suggests mid-tier IT companies could prove more nimble, given their ability to adapt faster to changing industry dynamics and expand into newer services. Their growth is projected to hold at high single-digit levels, though the broader subdued outlook is expected to temper overall momentum.
