The Future of Indian IT: Will AI Disrupt Revenue and Jobs?
Analysts at Macquarie believe that worries about AI hurting revenue are exaggerated. However, experts at Citi and Jefferies are taking a more cautious approach.
The debate intensified this week after a new automation tool from the US AI platform Anthropic was released. This launch caused Indian IT stocks to lose ₹2 lakh crore in value on Wednesday. Financial experts remain divided on what these AI tools mean for India’s $250 billion IT sector in the long run.
The market drop began in Western countries before spreading to major Indian IT companies. This shift highlights a change in how investors view value in the age of artificial intelligence.
New AI Tools and Rapid Growth
Anthropic recently added a tool to its website that can automate tasks like legal briefings and contract reviews. Their AI coding tool, Claude Code, has also seen massive success. After its public launch in May last year, reports suggest it reached $1 billion in annual revenue by November.
Are Concerns Overblown?
Analysts at Macquarie argue that the fear of AI-driven revenue loss is too high. They point out that Indian IT firms work with large global companies on highly complex systems, such as SAP and ERP. Much of this work involves large-scale business transformations that are difficult to fully automate.
Bank of America (BofA) also noted that Anthropic’s new features might affect software companies more than IT service providers. They found that AI is currently most useful in areas like risk management, compliance, and developer productivity. While AI can improve coding speed by 10% to 15%, it will take time for these gains to turn into higher profits.
Meanwhile, Morgan Stanley observed that while the outlook for financial services is improving, fast growth may not return until after 2026. Many executives believe AI will eventually lead to more spending, with IT firms acting as the bridge between new AI tools and older business processes.
Risks to Revenue and Employment
On the other hand, Citi and Jefferies are more concerned. Citi pointed to slow growth among top Indian IT firms and increasing competition from Global Capability Centers (GCCs).
Jefferies warned that AI automation could shrink revenue from “application services,” which makes up 40% to 70% of total income for these firms. They suggest that current market expectations might be ignoring this risk. Because of this, they prefer specific stocks like HCLTech, Infosys, Coforge, and Sagility.
The Impact on Jobs
Beyond financial risks, analysts are flagging the impact of AI on the workforce. Indian IT companies have already started cutting roles as automation reduces the need for large teams. Since the early 2000s, this sector has been a primary career path for millions of graduates, but that path is now changing rapidly.
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