Rising global and geopolitical uncertainty is weighing on IT spending and may delay a broad recovery in client budgets
| Photo Credit:
STRINGER/INDIA
The Indian IT sector is expected to begin FY26 on a subdued note, with clients continuing to rein in discretionary tech spending amid persistent macroeconomic and geopolitical uncertainty. While overall demand remains under pressure, particularly across manufacturing, retail and logistics, green shoots in BFSI are offering shelter for Indian IT. Analysts project Indian IT revenue growth at 3.2 per cent for FY26, mirroring FY25 levels, with hopes pinned on a recovery from Q2 onwards.
According to a Forrester report on the Global Tech Market Forecast, in 2025, global IT services will grow by 3.6 per cent, up from 2.9 per cent in 2024, driven by GenAI consulting, IaaS and tech-enabled business transformation.
However, rising global and geopolitical uncertainty is weighing on IT spending and may delay a broad recovery in client budgets, according to a report by Emkay Global Financial Services. The past few months have witnessed neither material improvement nor further deterioration in the demand environment.
The first quarter began on an uncertain note amid disruptions from the Trump administration’s reciprocal tariff measures, which may limit discretionary spending. But the slowdown in demand was milder than expected, with a recovery expected in Q2 or Q3.
A report by HDFC Securities observed that IT firms are expected to maintain their full-year FY26 guidance amid global economic uncertainty. The deal pipeline remains robust, particularly in areas such as cost optimisation, infrastructure modernisation and AI initiatives. GenAI continues to gain momentum, with strong demand pushing many projects beyond the proof-of-concept (POC) stage into large-scale deployment, as reflected in Accenture’s robust GenAI bookings.
On the other hand, major US banks such as J.P. Morgan, Wells Fargo, Goldman Sachs, Citibank and Morgan Stanley, reported better-than-estimated results, driven by robust trading revenue.
Other concerns
While tech spending remains a strategic priority, banks voiced concerns over recession risks and shifting tariff policies. Despite the caution, the overall outlook for technology budgets remains steady, in line with TCS’ view that US banks are currently stable, brokerage firm Motilal Oswal Financial Services (MOFSL) asserted in its report.
Ashutosh Sharma, VP & Research Director, Forrester, commented, “The outlook for FY26 remains positive, driven by continued global demand for technology and the accelerating impact of AI, which will enable much of this innovation. This is expected to translate into meaningful revenue gains for IT services companies. That said, we assume geopolitics and economic conditions remain favorable, and no unplanned surprises like tariffs. The overall outlook remains cautiously optimistic, as the fundamentals appear to be in place. After the post-COVID high, the market experienced a significant low. However, since that downturn in late 2022, we began to see a pickup toward the end of 2024 and expect that positive trend to continue.”
(With inputs from bl intern Nethra Sailesh)
More Like This
Published on July 3, 2025
