Budget 2026 and the IT sector\u2019s big question: Will policy remove roadblocks and unlock the next growth cycle?<\/p>\n
As India heads toward Union Budget 2026, the message from the Information Technology and Business Process Management (IT\/BPM) industry is unusually direct: remove friction that hurts margins, and strengthen the levers that help the sector scale. From labour code ambiguity to AI infrastructure, from skilling gaps to cross-border tax clarity, industry leaders are framing their expectations not as wishlist sops, but as structural fixes that could determine how competitive India\u2019s $250+ billion digital services ecosystem remains over the next decade.<\/p>\n
Unlike previous years, when the focus was on incentives, this time the industry\u2019s demands are rooted in execution realities. Margins are under pressure, global clients are cautious on discretionary spending, and AI-led transformation is reshaping delivery models.<\/p>\n
Executives argue that Budget 2026 can materially influence:<\/p>\n
Profitability outlook for large IT services firms<\/p>\n<\/li>\n
Hiring momentum and wage planning<\/p>\n<\/li>\n
Speed of AI adoption across delivery<\/p>\n<\/li>\n
India\u2019s competitiveness in cross-border digital services<\/p>\n<\/li>\n<\/ul>\n
The underlying tone is pragmatic. As one industry leader summed it up: \u201cFix what slows companies down, and back what helps them scale.\u201d<\/p>\n
Also Read : India\u2013EU Trade Deal Nears Finish Line \u2014 Farm, Industry and Climate Red Lines Shape Final Push<\/a><\/p>\n One of the most immediate asks is clarity on labour codes. During the Q3 FY26 earnings season, major IT firms disclosed that ambiguity around wage definitions led to provisions of nearly \u20b95,000 crore across the top companies, as revised rules inflated gratuity and provident fund liabilities.<\/p>\n Mohit Joshi, CEO and MD of Tech Mahindra, made the concern explicit:<\/p>\n \u201cFor all the IT services companies, clearly, there was a significant provision that happened because of the labour code implications. I think it hits profitability. We’re looking for a little bit more clarity on the labour code requirements.\u201d<\/p>\n<\/blockquote>\n For investors, this matters because even a 15\u201320 basis point margin impact, when applied to companies with revenues of tens of thousands of crores, can materially affect earnings estimates and stock valuations.<\/p>\n Beyond compliance clarity, the industry\u2019s most consistent demand is for stronger policy support around AI adoption. Leaders argue that India risks losing momentum if AI remains stuck in pilot projects instead of moving into scaled enterprise deployment.<\/p>\n Venkatraman Narayanan, MD of Happiest Minds Technologies, framed the opportunity clearly:<\/p>\n \u201cPolicy measures that encourage adoption of AI, automation, and Generative AI across IT and BPM operations can significantly enhance productivity, efficiency, and service quality.\u201d<\/p>\n<\/blockquote>\n The expectation from Budget 2026 is not just tax breaks, but ecosystem building:<\/p>\n Incentives for enterprise AI adoption<\/p>\n<\/li>\n Support for AI infrastructure and compute access<\/p>\n<\/li>\n Encouragement for private capital in AI R&D<\/p>\n<\/li>\n Faster rollout of policies linked to the IndiaAI Mission<\/p>\n<\/li>\n<\/ul>\n For markets, this matters because firms positioned strongly in AI-led services could command valuation premiums, while laggards risk derating.<\/p>\n While AI creates opportunity, talent readiness is fast becoming the binding constraint. Leaders are now talking less about fresh hiring volumes and more about job readiness and mid-career transitions.<\/p>\n Kapil Joshi, CEO of Quess Corp, warned that as Global Capability Centres (GCCs) shift toward higher-value mandates, talent availability becomes strategic:<\/p>\n \u201cTalent availability is emerging as the most critical lever as GCCs move toward value-driven mandates.\u201d<\/p>\n<\/blockquote>\n Industry voices are asking Budget 2026 to prioritise:<\/p>\n Structured mid-career reskilling frameworks<\/p>\n<\/li>\n Incentives for companies investing in reskilling<\/p>\n<\/li>\n Stronger apprenticeship and internship ecosystems<\/p>\n<\/li>\n Industry-linked skilling programs in Tier 2 and Tier 3 cities<\/p>\n<\/li>\n<\/ul>\n Achal Khanna, CEO of SHRM APAC & MENA, highlighted the cost impact on companies: delays in job readiness directly increase training expenditure and time-to-productivity.<\/p>\n The wishlist is expanding beyond enterprise services into platform-level ambition. Nitin Chandalia of BCG pointed to the success of Digital Public Infrastructure (DPI) such as Aadhaar and UPI and suggested that the next leap could come from extending DPI into healthcare, logistics and manufacturing.<\/p>\n \u201cThe government could build on the success of Digital Public Infrastructure by expanding its application beyond payments and identity\u2026 unlocking productivity and efficiency gains.\u201d<\/p>\n<\/blockquote>\n Such moves could create multi-year demand for IT services, cloud integration, cybersecurity, and data platforms \u2014 themes that equity analysts are already tracking for medium-term growth.<\/p>\n Several leaders also flagged export competitiveness issues. Services contribute nearly 50% of India\u2019s exports, according to Rajesh Chhabra of Acronis, yet companies continue to face friction around:<\/p>\n Cross-border tax clarity<\/p>\n<\/li>\n Delayed GST refunds<\/p>\n<\/li>\n Ambiguity on ESOP taxation<\/p>\n<\/li>\n Overlapping compliance requirements for BPM exporters<\/p>\n<\/li>\n<\/ul>\n These may sound like technical issues, but for investors, they directly influence cost structures, cash flows and the ease with which Indian firms can attract global talent.<\/p>\n Markets have begun to selectively price in Budget-linked expectations. In recent sessions, investors have shown preference for:<\/p>\n Large-cap IT services firms with strong AI narratives<\/p>\n<\/li>\n Digital engineering and cloud-focused midcaps<\/p>\n<\/li>\n Staffing and skilling-linked businesses<\/p>\n<\/li>\n Companies linked to data centres and digital infrastructure<\/p>\n<\/li>\n<\/ul>\n Traders are positioning cautiously, waiting for concrete signals from Budget documents rather than relying on broad sentiment. Any mention of labour code clarity, AI incentives, or skilling outlays in the Finance Minister\u2019s speech could trigger immediate stock-specific reactions.<\/p>\n For long-term investors, Budget 2026 could help differentiate winners from laggards within the IT space.<\/p>\n Potential positives:<\/p>\n Companies with strong AI platforms and domain expertise may see earnings upgrades<\/p>\n<\/li>\n Firms benefiting from skilling and productivity initiatives could improve margins<\/p>\n<\/li>\n Export-oriented digital services players may gain competitiveness globally<\/p>\n<\/li>\n<\/ul>\n Key risks to watch:<\/p>\n Continued ambiguity on labour codes<\/p>\n<\/li>\n Lack of concrete AI infrastructure support<\/p>\n<\/li>\n Policy intent without execution clarity<\/p>\n<\/li>\n<\/ul>\n As one analyst put it, \u201cThe sector doesn\u2019t need handouts. It needs predictability.\u201d<\/p>\n Across voices from Tech Mahindra to Deloitte, from BCG to staffing firms, the message is consistent. The industry is not asking for cosmetic relief. It is asking for structural enablers.<\/p>\n If Budget 2026 delivers on:<\/p>\n Labour code clarity<\/p>\n<\/li>\n AI ecosystem investment<\/p>\n<\/li>\n Skilling at scale<\/p>\n<\/li>\n Compliance simplification<\/p>\n<\/li>\n<\/ul>\n Budget 2026 and the IT sector\u2019s big question: Will policy remove roadblocks and unlock the next growth cycle? As India heads toward Union Budget 2026, the message from the Information Technology and Business Process Management (IT\/BPM) industry is unusually direct: remove friction that hurts margins, and strengthen the levers that help the sector scale. From […]<\/p>\n","protected":false},"author":4,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1362],"tags":[],"ppma_author":[1331],"class_list":{"0":"post-20059","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-finance-and-economy-news"}," _eael_post_view_count":0,"authors":[{"term_id":1331,"user_id":4,"is_guest":0,"slug":"sourabh","display_name":"Sourabh Sharma","avatar_url":{"url":"https:\/\/trending.niftytrader.in\/wp-content\/uploads\/2025\/11\/Sourabh-Sharma.png","url2x":"https:\/\/trending.niftytrader.in\/wp-content\/uploads\/2025\/11\/Sourabh-Sharma.png"},"0":null,"1":"","2":"","3":"","4":"","5":"","6":"","7":""}],"_links":{"self":[{"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/posts\/20059","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/comments?post=20059"}],"version-history":[{"count":1,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/posts\/20059\/revisions"}],"predecessor-version":[{"id":20061,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/posts\/20059\/revisions\/20061"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/media\/20060"}],"wp:attachment":[{"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/media?parent=20059"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/categories?post=20059"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/tags?post=20059"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/ppma_author?post=20059"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Labour codes are no longer a policy issue, they are a margin issue<\/h2>\n
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AI is no longer optional \u2014 the industry wants help moving from pilots to scale<\/h2>\n
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Skilling and mid-career transitions emerge as the real bottleneck<\/h2>\n
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Digital Public Infrastructure and frontier tech: the next platform opportunity<\/h2>\n
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Cross-border taxes, ESOP norms and compliance friction weigh on competitiveness<\/h2>\n
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Here\u2019s what happened today and why traders reacted<\/h2>\n
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What this means for investors and portfolios<\/h2>\n
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The bottom line: less about sops, more about structural support<\/h2>\n
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