AI to Boost Indian IT Revenue by FY30, CLSA Predicts

Artificial Intelligence (AI) is positioned to become a significant long-term growth catalyst for India’s IT services sector, with AI-driven volumes projected to counteract revenue deflation from automation by fiscal year 2030. This analytical perspective comes from a recent CLSA report, outlining a crucial shift in industry dynamics.

Key Projections for AI’s Impact

• The IT services industry is expected to see a growth inflection within 18-24 months.
• Fiscal Year 2028 is identified as a critical period for this transition.
• Mid-to-high single-digit US-dollar revenue growth is anticipated by FY31.
• Generative AI’s share of IT services spending is projected to double to 11% by 2029.

Despite these long-term opportunities, the near-term outlook presents challenges. Weak macroeconomic conditions coupled with reduced discretionary spending are currently impeding growth for the sector.

Navigating Future Challenges

While AI promises to create new opportunities, the path forward is not without hurdles. The report highlights several concerns that could impact the sector’s trajectory.

• Rising competition within the IT services landscape.
• Ongoing geopolitical uncertainties affecting global business.
• The risk of IT services losing AI spending share to hardware and software providers.

Initial revenue compression due to productivity gains is expected, but this will eventually give way to a sharp expansion in AI spending across the industry. This fundamental shift underscores AI’s transformative potential for Indian IT services, driving future growth despite an evolving competitive landscape.