What Donald Trump’s ‘Reciprocal Tariffs’ mean for India’s $280 billion software industry: Analysts see small-time pain, but long-term gain

The Trump administration’s imposition of reciprocal tariffs has sent ripples through India’s $280 billion software services industry, which derives nearly half of its revenues from the United States. Analysts predict short-term challenges but remain optimistic about long-term opportunities for growth and adaptation.
As reported by Economic Times, the tariffs are expected to create inflationary pressures on U.S. companies, leading to a slowdown in discretionary technology spending. This could dent revenue growth for Indian IT firms, which have already been struggling to recover from one of the slowest growth years in FY24. Industry experts anticipate a softer-than-projected fiscal first quarter through June, with revenue growth declining by as much as 1.3% sequentially in the March quarter.
Akash Verma, Practice Director at Everest Group, noted, “The Trump administration’s reciprocal tariffs will impact IT services demand, not supply. In the short term, sectors like manufacturing, electronics, and retail will face cost pressures, leading to cuts in non-essential IT spending.”
Despite the immediate setbacks, industry veterans see potential for growth in the medium to long term. Ganesh Natarajan, Founder and Chairman of 5F World, highlighted opportunities in the U.S. manufacturing sector, which is undergoing a resurgence. “Businesses will adapt by optimizing costs, diversifying suppliers, and increasing automation, ultimately creating new growth opportunities for service providers,” he said.
Ray Wang, Founder of Constellation Research, expects the impact to last about six months, after which US firms may resume investments in technology. He also pointed out that the US services trade imbalance could lead to increased H1-B visa issuances, benefiting Indian IT firms.
Anuj Sethi, Senior Director at Crisil Ratings, projected a modest 6-8% revenue growth for the Indian IT services sector in FY26. While discretionary spending may remain low, the focus on internal capabilities and automation could drive innovation and efficiency.
To mitigate the impact of tariffs, Indian IT companies are likely to focus on cost optimization and diversification. The unfolding scenario may also lead to greater foreign investments in sectors like healthcare, energy, and manufacturing, requiring advanced digital and AI solutions.