AI Pressure to Keep IT Services Growth Near 3 pc: Kotak Report

New Delhi, Apr 29 (BNP): India’s IT services sector is likely to witness restrained growth of around 3 per cent as artificial intelligence-led efficiencies continue to put pressure on pricing and margins, according to a Kotak Institutional Equities report.

The report states that while AI adoption is improving productivity and operational efficiency across IT firms, it is also leading to lower billing rates, creating a deflationary impact on overall revenue growth.

Mid-tier IT companies are expected to perform relatively better compared to large players, supported by niche capabilities, agile business models, and faster adaptation to new technologies.

Kotak noted that the global shift toward automation and AI-based solutions is reshaping traditional outsourcing models, making the industry more competitive on pricing.

However, the report added that AI will remain a long-term growth driver, helping companies improve efficiency even as near-term revenue growth stays moderate.

Overall, the IT sector is expected to enter a phase of stable but slower growth, with firms focusing on productivity gains and technology-driven transformation.