Despite macroeconomic challenges and cautious client spending, industry analysts predict AI growth will eventually propel India’s IT services sector into a mid- to high-single-digit revenue rise by FY31, with generative AI expected to double its market share by 2029.
Artificial intelligence could become a net positive for India’s IT services industry by the end of the decade, even if it initially weighs on revenue by improving productivity, according to CLSA. The brokerage said AI-led volumes may eventually more than offset the deflation that comes from automation, with that balance likely to shift in favour of growth by FY30.
For the moment, however, the industry remains under pressure from a weak macroeconomic backdrop and subdued discretionary spending. CLSA said the sector is dealing with multiple macro and micro headwinds, and that near-term growth is still being limited by cautious client budgets, geopolitical uncertainty and a more competitive market. Even so, the brokerage said there is no clear sign of a sharp pullback in large deal activity or in technology budgets among major global companies because of AI.
CLSA expects the impact of AI spending to broaden materially over time. Citing CLSA and IDC estimates, the report said generative AI’s share of overall IT services spending could double to 11 per cent by 2029. It also projected that the industry’s US-dollar revenue growth could reach the mid- to high-single digits by FY31, with FY28 identified as a possible turning point for stronger momentum. Business Standard reported that Crisil also sees modest mid-single-digit growth for the sector in the next financial year, with AI and generative AI increasingly supporting transformation-led demand.
Evidence from the labour market suggests that AI has not yet dented hiring in any meaningful way. The Financial Express reported that IT and software services hiring rose 6.4 per cent year on year in February 2026, and that companies including Tata Consultancy Services, Infosys and Cognizant continue to recruit for specialised AI roles. CLSA has also argued that fears of a broad AI-led disruption in Indian IT are overdone, although it has cut price targets on valuation concerns and remains selective on stock picks, including Infosys, Tech Mahindra, Coforge and Persistent Systems.
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