India's information technology sector is undergoing a significant transformation, driven by the rapid integration of artificial intelligence (AI) and the impact of recent U.S. trade policies. Tata Consultancy Services (TCS) has established a dedicated AI unit, led by Amit Kapur, to centralize and accelerate its AI development and deployment. This strategic move aims to position TCS at the forefront of AI integration among Indian IT firms, following industry trends where AI adoption is reshaping the outsourcing landscape.
The U.S. has imposed a 50% tariff on a wide range of Indian exports, effective August 27, 2025. This measure, a response to India's continued trade in Russian oil, is expected to significantly impact India's export-oriented industries. Sectors such as textiles, apparel, gems, jewelry, and pharmaceuticals are particularly vulnerable. The Global Trade Research Initiative (GTRI) anticipates a potential 40-45% drop in merchandise exports to the U.S. for the current fiscal year, with estimates suggesting that approximately two-thirds of India's exports to the U.S. could be affected.
In response to these trade pressures, India is strengthening its economic ties with China and Russia. Concurrently, a recent ban on real-money online gaming has sent ripples through the gaming sector, impacting sponsorships and the advertising industry, with an estimated $1 billion annual impact. Industry associations estimate that the real-money gaming sector supported over two lakh jobs before the ban and contributed significantly to tax revenue.
Despite these challenges, the Indian market has shown resilience. Key indices like the Nifty 50 have remained relatively stable, and the Indian rupee has experienced only a minor dip. Fitch Ratings has maintained India's credit rating at 'BBB-' with a stable outlook, projecting a 6.5% GDP growth for FY26. Fitch acknowledges the potential impact of U.S. tariffs as a moderate risk but anticipates a limited effect on overall growth due to substantial foreign exchange reserves, which stood at $695 billion as of mid-August 2025, providing robust external financial stability. The IT sector's medium-term outlook remains cautiously optimistic, supported by strong deal pipelines and increasing AI adoption, even as short-term performance reflects current economic headwinds.