Indian IT Sector Poised for AI-Led Growth Inflection by FY27, Says Anand Rathi Report
The Indian IT services sector stands on the cusp of a significant multi-year growth cycle, according to a recent sectoral report by brokerage firm Anand Rathi. As the global technology landscape pivots from infrastructure building to enterprise-level application, domestic IT firms are expected to emerge as primary beneficiaries, with a major growth inflection anticipated by fiscal year 2027.
Shifting Gears: From Capacity to Payback
The core thesis of the report suggests that the global AI investment cycle is entering its second phase. After years of heavy spending on foundational infrastructure and capacity building, the focus is now shifting toward “proving payback.” As enterprises transition from AI experimentation to broader, practical adoption, the demand for specialized services—such as data preparation, system integration, governance, and cybersecurity—is expected to surge.
This evolution is particularly critical for Indian firms that have navigated nearly three years of subdued discretionary spending and elongated deal cycles. While there have been long-standing concerns that AI-driven productivity might cannibalize traditional IT service revenue, analysts argue the opposite is true.
“AI is expanding the Total Addressable Market (TAM) rather than compressing it,” the report noted. By reducing the overall cost of technology modernization, the widespread adoption of AI is expected to revive legacy projects that were previously sidelined by clients, creating a fresh pipeline of work in AI deployment, optimization, and ongoing operations.
Multi-Year Growth Horizon
The brokerage anticipates that this transition will create a robust growth trajectory extending through FY28 and FY29. With major global hyperscalers projected to reach approximately $825 billion in capital expenditure, corporate boards and CFOs are increasingly demanding tangible returns on their technology investments. This pressure to demonstrate financial viability is precisely where the expertise of Indian IT service providers becomes essential for global clients.
Evidence of this shift is already emerging in the financial disclosures of major industry players. Tata Consultancy Services (TCS) has already reported an annualized AI revenue of $2.6 billion, while Infosys has disclosed that AI services now account for 8.2% of its total revenue. Similarly, companies like HCLTech and LTIMindtree are reporting steady growth in their specialized AI service portfolios.
Navigating Near-Term Hurdles
Despite the long-term optimism, the path to the FY27 inflection point is not without challenges. The report highlights several near-term risks that could dampen sentiment. Pricing pressures driven by intense competition, a precarious global economic environment, and the impact of automation on lower-end IT services are expected to remain as headwinds.
As the industry pivots toward higher-value work, companies will need to carefully manage these transitions to ensure that the promise of AI-led growth is fully realized. For investors and stakeholders, the next 18 to 24 months will be crucial as the sector moves from the theoretical promise of generative AI to the practical reality of enterprise-wide deployment.
