Macroeconomic factors in Indian IT Sector for FY2026

The US is a major market for India’s IT sector, making up 55% of IT exports in FY2024. Naturally, when US business sentiment dips or tech spending slows down, its ripple effect can be seen in India.

And that’s exactly what’s happening. In March 2025, the US Fed cut its GDP growth forecast from 2.1% to 1.7% for FY2025 — the slowest pace in eight years, pandemic aside. Then in June, it lowered the estimate for the second consecutive time, trimming the forecast again to 1.4%.

In India, the domestic revenue of the IT sector accounts for around 20% of the total, making it more sensitive to global economic changes than local ones. But that could be shifting. NASSCOM projects that domestic IT demand will outpace exports in FY2025, with domestic revenues expected to grow by 7% to $58.2 billion, while exports are likely to increase by 4.6% to $224 billion.

Supporting this trend, the HSBC India Services PMI rose from 56.5 in January 2025 to 62.9 in August, its highest reading since 2010, pointing to stronger business activity and job creation. By comparison, the US ISM Services PMI edged down from 52.8 to 52.0 in the same period, reflecting a stable-to-softening trend and more cautious spending in the US market.

Indian IT companies majorly earn their revenues from export markets, primarily the U.S. and Europe. Naturally, this makes the sector very sensitive to currency fluctuations. When the rupee weakens against the dollar, euro, or pound, revenues booked overseas translate into higher earnings in INR. This is why keeping an eye on INR movements against key currencies is critical when evaluating the sector’s outlook.

Global Capability Centres (GCCs) in India continue to expand their hiring footprint despite broader IT sector headwinds. Between 2019 and 2024, they added over 600,000 jobs, and employment is projected to scale to 2.8–4 million by 2030. For FY2026, 47% of surveyed GCCs plan to increase hiring, while only 17% expect reductions, reflecting sustained confidence in India’s talent pool. The hiring mix is shifting decisively toward value over volume, with strategic roles in product, engineering, data science, and R&D leading demand. Overall, GCC hiring is set to remain strong but increasingly selective, anchored in niche digital skills and early-career pipelines

ndia’s export dynamic is undergoing a noticeable shift, with services exports outpacing merchandise exports in both growth and share. In FY2024- 25, services exports jumped by 13.6% to USD 387.4 billion, driven by strong gains in software services and business consultancy. This now accounts for 88.5% of the merchandise export value.

Meanwhile, merchandise exports remained flat at USD 437.7 billion, with declines in Petrol, Oil and Lubricants (POL) and gems & jewellery offsetting gains in electronics and pharmaceuticals.

The trend is expected to persist in FY2025- 26, with services exports projected to rise by 7.8% to USD 417.7 billion, narrowing the gap to 94.3% of merchandise exports. This underscores India’s growth in global services trade as demand for goods remains tepid

The Indian IT sector heads into FY2026 balancing between caution and opportunity. Earnings are under pressure, hiring has slowed sharply, and foreign investors are pulling back as global demand stays weak. Still, it’s not all negative; a healthy pipeline of deals, steady growth in ER&D exports, and the rise of GCCs are bright spots. The real challenge now is turning these wins into actual revenues and using AI-led transformation to unlock the next phase of growth. For investors, IT in 2026 is less about short-term profits and more about being ready for the bigger digital shift that’s on the way.