Indian IT Sector See Moderation in Demand due to Deferment of Discretionary Spends: ICRA Several multinational companies have already been expanding their GCC footprint in India in recent years and the significant fee hike for H-1B visa is likely to further accelerate offshoring work to GCCs
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.
Indian IT services companies have been witnessing some moderation in demand due to deferment of discretionary spends by companies in the key markets of the US and Europe.
"This is amidst intensifying global macroeconomic uncertainties, partly attributable to the recent tariffs imposed by the US government on imports into the US. In addition to trade-related challenges, evolving policy changes around H-1B visas and HIRE Act could add to the industry woes," ICRA said in a report.
Indian IT services industry generates a lion's share from the US, followed by Europe and the rest of the world (RoW). ICRA's sample set of five leading Indian IT services companies resonated this trend and generated around 55 per cent of its FY2025 revenues from the US, around 30 per cent from Europe and the balance around 15 per cent from the RoW.
India accounted for about 71 per cent of all approved H-1B visa petitions in CY2024, maintaining its dominant position. This is driven by its large pool of highly skilled professionals in IT and Science, Technology, Engineering, and Mathematics (STEM) fields. The US companies continue to rely heavily on Indian talent to fill specialised tech roles.
The Halting International Relocation of Employment (HIRE) Act's tax provisions pose a strategic threat to Indian IT services companies operating in the US. It could reduce cost advantages and impact competitiveness in the American market. This puts pressure on Indian companies to further diversify geographically and also adapt their global delivery models.
According to ICRA, the financial impact of the H-1B visa fee hike on IT companies is expected to be "modest", with an estimated 105 basis point reduction in operating profits for its sample set companies in FY2027, even if the increased cost burden is fully borne by them.
Recent policy changes are likely to have a mixed impact on global capability centres (GCCs) in India, the ICRA report stated. Several multinational companies have already been expanding their GCC footprint in India in recent years and the significant fee hike for H-1B visa is likely to further accelerate offshoring work to GCCs. However, this may be tempered to some extent by potential imposition of any material outsourcing tax under the HIRE Act.
