India’s $280 billion IT industry is facing a pivotal moment. After enjoying massive growth during the pandemic-driven digital transformation boom, the sector has now posted two consecutive years of single-digit growth—a worrying sign for investors, analysts, and employees alike. The burning question is: Is this just a temporary slowdown, or are we witnessing a deeper structural change in the Indian IT sector?
Muted Growth Across Top IT Companies in FY25
The recently released FY25 financial results of IT majors like TCS, Infosys, and Wipro have painted a sobering picture. All three companies reported muted growth:
TCS: 4.2% growth in FY25 (vs 13.7% in FY23)
Infosys: 4.2% growth YoY in FY25 (vs 25.6% in FY23)
Wipro: -2.3% decline in FY25 (vs 11.2% in FY23)
These numbers are a sharp contrast to the stellar growth seen during FY23, the final year of the pandemic-induced digital boom.
📌 “The business model is ripe for disruption… The linear scaling of IT services is no longer sustainable,” said HCLTech CEO C Vijayakumar at the Nasscom Technology and Leadership Forum 2025.
More Than Just a Cyclical Dip
Experts believe the current IT sector slowdown is not merely a cyclical downturn, but a sign of broader structural issues. According to Phil Fersht, CEO of HfS Research, demand has saturated across the Global 2000 enterprises, and IT service providers are struggling to move beyond traditional models. “They’re too large and too focused on short-term targets to drive real innovation,” he added.
Echoing this sentiment, Zoho co-founder Sridhar Vembu remarked that the past 30 years of the software industry cannot be a guide for the next 30. “We are truly at an inflection point,” he posted on X (formerly Twitter).
AI Disruption: Game-Changer or Growing Pain?
Over the last 18 months, AI has become a central focus for IT companies, with firms integrating AI use cases into almost every client conversation. However, the actual revenue impact has been limited so far. Analysts point out a gap between AI development and deployment.
📌 “AI revenues are still small, mostly PoC deals ranging from $1–$5 million and lasting just six to eight months,” said Gaurav Vasu, CEO of UnearthInsight.
While global players like Accenture are vocal about their AI deal pipelines, Indian IT giants like TCS have remained relatively silent. Most AI revenues are currently embedded in existing service lines, making it harder to gauge true adoption.
The Rise of GCCs: A Double-Edged Sword
Another major factor reshaping the Indian IT landscape is the rise of Global Capability Centers (GCCs). These in-house tech hubs, set up by multinational firms in India, are increasingly taking on AI, analytics, and product engineering tasks that were traditionally outsourced to IT companies.
Despite public claims by IT firms that GCCs are a “complement, not competition”, industry experts believe the competition is real. As GCCs build strategic capabilities, they are cutting into the revenue pie of Indian IT firms.
The Economic Survey recently highlighted the GCC boom—India is now home to over 1,700 GCCs, up from just 760 in 2012. These centers are expected to contribute $121 billion to India’s GDP by 2030.
📌 “GCCs are no longer back offices—they’re now innovation hubs leading AI adoption and digital transformation,” said a report by UnearthInsight.
Hiring Slows as Industry Restructures
The IT sector slowdown has also been reflected in subdued hiring trends. After historic headcount declines in FY24, companies barely bounced back in FY25, collectively adding just 13,553 employees.
The Economic Survey warned that hiring recovery will remain weak, even in a stable macroeconomic scenario. As clients demand greater value for money, Indian IT firms will need to rethink their delivery models, possibly moving towards GCC-style structures or AI-led services.
