BENGALURU: The Indian IT sector remains resilient, and there is no direct impact from the US tariff hikes, say experts. However, there might be indirect bearings as clients across sectors might postpone or slowdown spending.
Peter Bendor-Samuel, Founder and Executive Chairman of Everest Group said it is unlikely that the service industry will be affected by tariffs. "I believe the Trump administration would like to, but it is just too complicated to tax tariffs," he added.
India dominates US IT outsourcing and the country's software services export stood at over $205 billion in FY24. Peter Bendor-Samuel pointed out that this (hike) is going to reduce demand.
Jefferies said that there may be indirect impacts from slower GDP growth due to higher tariffs despite potentially lower rates in the future. It said in a note that "India's software exports to the US are also large ($103 billion in FY24 as per RBI) but no tariff impact here."
Experts pointed out that certain verticals such as logistics and retail will get impacted and in turn this will impact IT companies that have exposure to these verticals.
Chirag Kachhadiya, Senior Research Analyst, Ashika Stock Broking said the US remains the largest revenue-contributing geography for large-cap IT companies, accounting for over 50% of industry revenue. "While we do not expect IT services to face a direct impact from tariffs, restrictive trade policies affecting other sectors and countries could influence overall technology spending," he added.
Considering the present demand environment, there might be a slowdown in hiring as well. Venture Catalysts said that Trump’s tariff policies may create challenges for export-oriented sectors, such as electronics and textiles, in the short term. "However, these policies could also foster innovation. Start-ups in deep tech, advanced manufacturing, and AI solutions will be essential in transforming India's start-up ecosystem into a global innovation hub amid changing trade dynamics," the largest incubator, backing early-stage start-ups across sectors said.