India’s IT services sector is projected to grow by 6-7 per cent in FY27, despite the ongoing impact of artificial intelligence (AI) adoption on traditional IT contracts, according to a report by HSBC Global Investment Research released on Wednesday.
The report noted that while revenue growth is likely to be around 5-6 per cent next fiscal, this would translate into an 8-10 per cent increase in project volumes, as companies continue to boost technology spending.
India’s IT firms are expected to benefit from a robust US macroeconomic environment, with several top American clients reporting their strongest quarterly results in years. Analysts at HSBC said this momentum is likely to improve corporate confidence and spur higher tech spending through 2025, offsetting some of the deflationary effects of AI-driven automation.
“As AI agents evolve into multi-agent systems, potentially prompting a redesign of enterprise software architecture and infrastructure, this shift could unlock new opportunities for Indian IT firms,” the report said.
However, HSBC also highlighted that industry estimates suggest AI could reduce the value of IT services contracts by 8-10 per cent over the next three to four years, translating into an annual impact of 3-4 per cent during 2025–27. So far, Indian IT firms have compensated for this pressure through higher project volumes, which has kept overall revenue growth steady.
“In 2026, we expect a push and pull between this deflationary impact and the macro tailwind,” the report noted.
HSBC dismissed concerns that advanced “Agentic AI” systems could disrupt the software industry to the extent of replacing IT services entirely. While hyperscalers continue to capture a larger share of enterprise tech budgets, a complete shift away from services remains unlikely, the report said.
Meanwhile, Tata Consultancy Services (TCS), India’s largest IT services firm, announced a wage hike in August for about 80 per cent of its workforce, primarily mid- and junior-level employees. This comes as the company prepares to lay off roughly 12,000 employees – around 2 per cent of its total headcount – in 2025 as part of its restructuring efforts.
(IANS)