Indian IT recovery at risk from US tariffs | Bengaluru News
Bengaluru: Even as the Indian IT sector looked forward to improved trade clarity by August, potentially boosting US consumer spending, the announcement of 25% tariffs threatens to dampen sentiment and curb discretionary spending, which was only beginning to show signs of recovery.The IT firms’ lacklustre performance was attributed to weak macroeconomic conditions, cautious client sentiment, and delayed decision-making. Nitin Bhatt, technology sector leader in EY India, said, “While the Indian IT services sector isn’t directly hit by the newly announced 25% US tariffs, the ripple effects could be substantial. Rising input costs may prompt US companies to scale back discretionary tech spending. Simultaneously, growing unease around workforce mobility and evolving digital taxation frameworks could redefine how cross-border services are priced and delivered. Companies that pivot to hybrid delivery models, diversify geographically, and embed AI at scale will be better positioned—not just to weather demand volatility, but to lead in an increasingly fragmented and uncertain global landscape.”Coming out of the earnings season, Indian IT firms maintained a largely cautious tone amid ongoing macroeconomic uncertainties. In the recent earnings calls, when asked about the reasons behind the bearish commentary and demand contraction, TCS CEO K Krithivasan explained that consumer industries are more impacted by tariffs, with manufacturing and auto sectors also significantly affected. However, he said industries like banking are not directly impacted but experience second-order effects due to low consumer confidence. Infosys CEO Salil Parekh noted during the earnings that while macroeconomic conditions remained uncertain—particularly in sectors like logistics, consumer products, and manufacturing—clients were increasingly focused on cost optimization and enterprise AI.
