AI Poised to Drive Growth in Indian IT Sector by FY27, Says Anand Rathi

The Indian IT services sector is poised for a potential growth surge as global technology spending shifts towards enterprise-level artificial intelligence (AI) deployment. A report by Anand Rathi indicates that this transition follows a period focused on building AI infrastructure. The brokerage anticipates that as generative AI moves from experimentation to widespread adoption, Indian IT companies could begin to see a flow of projects starting from fiscal year 2027.

Shift in Spending Priorities

Anand Rathi’s report suggests that the change in spending priorities will revive technology projects that have been delayed in recent years. The brokerage believes that the upcoming phase of AI investment will pivot from merely building capacity to demonstrating tangible returns on investment. This shift is expected to be driven more by services, as enterprises seek to integrate AI into their operations.

The IT sector has faced challenges over the past three years, including subdued discretionary spending and prolonged deal cycles. Concerns have also arisen regarding the impact of AI on demand for traditional IT services. However, Anand Rathi argues that broader AI adoption will necessitate spending across various technology functions, including data preparation, system integration, and governance. Upgrading legacy systems and enhancing cybersecurity will also be critical components of this spending.

Revenue Growth from AI Services

Indian IT companies are already experiencing revenue growth from AI-related services. Tata Consultancy Services (TCS) has reported annualized AI revenue of $2.6 billion, while AI services accounted for 8.2% of Infosys’ revenue. Other firms, such as HCLTech and LTIMindtree, have also noted increasing revenue streams from AI services.

Despite the anticipated recovery, the report highlights several near-term risks for the sector. Pricing pressures linked to AI, weak global economic conditions, and the impact of automation on lower-end IT services could pose challenges before companies transition to higher-value AI work.

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