Opportunity in adversity for Indian IT

Firms that can rapidly reinvent themselves will emerge as leaders in a new era marked by techno-nationalism and digital sovereignty

- NITIN BHATT JIGNESH THAKKAR

THE TARIFF WAR declared recently by US President Donald Trump is being seen by many pundits as the first step of a broader effort to fix global trade imbalances and bring "displaced" manufacturing jobs back to the US. Internal policy drafts, including a February memo from the Trump cabinet, suggest that future actions may target digital services, cross-border data flows, and immigration policy, which could potentially reshape the global information technology (IT) services market.

Although India's $280-billion technology sector is currently not directly impacted by the tariffs, the knock-on effects could be significant. American companies that are major consumers of IT services are expected to experience economic stress over the next several quarters. This may result in budget cuts, contract renegotiations, and even degrowth in some verticals.

For instance, the financial services sector is highly sensitive to economic shocks. As tariffs strain local businesses and credit markets, banks and insurers may delay or cancel outsourcing deals. High input costs and uncertain delivery timelines will likely impact the IT budgets of high-tech companies as well. With nearly 90% of its supply chain reliant on imports from countries such as China, Taiwan, and India, this sector is likely to experience severe disruption. Similarly, manufacturing, retail, and consumer-facing industries may also curtail IT spends, given revenue and margin pressures.