India’s information technology (IT) services sector may sustain its 6-8 per cent (in rupee terms) growth rate in the fiscal 2025-2026, amid continuing macroeconomic headwinds and emerging uncertainties in the US and Europe, Crisil Ratings said on Thursday. The revenue growth will be benefited by currency depreciation of around two per cent, it said.
This will be the third consecutive fiscal with mid-single-digit growth for India’s IT sector. Nevertheless, operating profitability remains healthy, led by modest employee addition amid low attrition, stated the study, which analysed top 24 IT services providers, accounting for 55 per cent of the estimated industry revenue of around ₹15 lakh crore this fiscal as per growth estimates.
Banking, financial services, and insurance account for nearly two-thirds of the revenue (around 30 per cent), followed by retail (around 15 per cent), manufacturing (10 per cent) and healthcare (10 per cent). Technology and services, communications and media form the bulk of remaining, it said.
Subdued growth
“After a modest recovery this fiscal, growth in BFSI and the retail segments will remain subdued at three-five per cent in FY26 amid slowing economic growth and cautionary discretionary spends. Manufacturing and healthcare segments will also remain at low single digits due to policy uncertainties. Further, IT spends will remain focused on efficiency gains, consolidation and optimising costs in the near term,” said Anuj Sethi, Senior Director, Crisil Ratings.
The study indicated that in FY25, revenue from BFSI and retail segments saw marginal recovery, growing around two per cent (on constant currency terms), while manufacturing and healthcare growth remained sluggish at three-four per cent amid macro challenges.
Notwithstanding, IT companies will continue to see healthy deal wins with increasing focus on artificial intelligence (AI) and generative AI (Gen AI) aspects across segments. While AI adoption is still evolving, players are now bundling AI-based offerings with their traditional services making it more efficient for end users, it said.
Players are responding to the modest growth outlook by rationalising costs primarily through controlled headcount additions (net of attritions), which grew by about a per cent in the first nine months of FY25 after dipping in FY24.
Threats & balances
“We expect domestic IT services providers to remain cautious on fresh hiring in fiscal 2026 and maintain focus on employee utilisation, estimated at around 85 per cent. With attrition remaining stable at around 13 per cent and flexibility of optimising the onshore/offshore mix amid criticality of the services offered, operating margin will sustain at a healthy 22-23 per cent,” said Aditya Jhaver, Director at Crisil Ratings.
Players will continue to eye acquisitions, especially small and mid-sized opportunities, that could enhance their product baskets and digital capabilities. Nevertheless, reliance on debt will be limited given expectations of stable cash generation, strong balance sheets and sizeable cash surpluses which will lend stability to credit profiles, he added.
The sector shall remain vulnerable to increasing number of global capability centres being set up in India. Also, a sharper-than-expected slowdown in economic growth in key markets could pose further downside risks to the growth estimates, the study said.
