India’s $283-billion IT sector is staring at a turbulent year ahead as fresh US tariff announced by President Donald Trump threaten to disrupt business confidence and consumer spending in its most critical market. While IT services themselves were not directly targeted, analysts say the ripple effects will be significant.
With the US accounting for over half of India’s $190 billion in software exports, any economic slowdown or client hesitation has an immediate impact on Indian technology firms. The sectors most exposed—manufacturing, logistics, and retail—are expected to scale back spending, which may delay new deals and stall existing digital transformation projects.
Sector Ratings Downgraded Amid Tariff Shock
Soon after the announcement, brokerages like Bernstein and ICICI Securities moved to downgrade their ratings on the Indian IT sector. J.P. Morgan, meanwhile, raised its probability of a global and US recession to 60%, citing the tariffs as a major risk to economic stability.
“With a rising risk of US recession and uncertain decision-making, we think chances of fiscal 2026 being a complete washout are rising,” J.P. Morgan said in a note on Friday.
Indian IT companies are expected to adopt a cautious outlook in the coming quarterly earnings, with at least six analysts projecting “conservative” revenue forecasts for the year.
Also read: Trump Eyes Pharma Tariffs After Initial Exemption
Discretionary Spending Takes the Hit
The most immediate concern is a likely slowdown in discretionary IT spending—projects that are not mission-critical but often drive future innovation and profitability. According to Kumar Rakesh, analyst at BNP Paribas, the impact will be more visible by the September quarter.
“Discretionary IT spend will likely see an impact across industry verticals. Companies to get impacted will typically be the high-growth companies in the large caps and some of the mid-caps where the exposure usually is much higher on the discretionary side,” Rakesh noted.
Market Reacts Sharply
Reflecting these fears, India’s Nifty IT index fell 3.6% on Friday, bringing its total losses for the week to over 9%—the steepest weekly drop in more than five years. Investor sentiment appears to mirror the growing concern over how prolonged macroeconomic uncertainty in the US will affect outsourcing and technology investments.
As Indian IT majors prepare for earnings season, the focus will shift to how they navigate tariff-triggered volatility, maintain deal pipelines, and manage costs in a potentially slower growth environment.
