India's information technology (IT) sector, a cornerstone of its economy, is bracing for a period of subdued growth in fiscal year 2026. This anticipated slowdown is primarily attributed to reduced discretionary spending by US clients and escalating global trade tensions, leading analysts to temper their growth projections.

Accenture, a global leader in IT services and a bellwether for the industry, recently reported constrained investments in discretionary projects and no significant uptick in client budgets. This development raises concerns about the demand trajectory for Indian IT firms, which heavily rely on US markets for revenue.

The Indian IT index has declined by 15.3% this year, marking its most challenging quarter since June 2022. Major players like Tata Consultancy Services (TCS), Wipro, Infosys, and HCLTech have experienced losses ranging from 11.2% to 18.1%. Amit Chandra, Deputy Vice President at HDFC Securities, expressed uncertainty about the first half of fiscal 2026, indicating potential delays in recovery.

Credit rating agency ICRA forecasts a moderate revenue growth of 4% to 6% in USD terms for Indian IT services companies in FY2026, mirroring the estimated growth for FY2025. This tempered outlook reflects ongoing macroeconomic uncertainties in key markets such as the US and Europe.

Despite challenges, India's real GDP growth is expected to remain steady at 6.5% in fiscal 2026. This resilience is attributed to factors like cooling food inflation, tax benefits, and lower borrowing costs, which are anticipated to boost consumer spending. However, global trade tensions and US-led tariff actions present potential headwinds that could impact various sectors, including IT.

While the Indian IT sector has historically demonstrated adaptability and resilience, the convergence of reduced US client spending and global economic uncertainties necessitates strategic agility. Companies may need to diversify their portfolios, explore emerging markets, and innovate service offerings to navigate the anticipated slowdown in fiscal 2026.