New Delhi, Mar 6 (KNN) A report by Morgan Stanley has indicated that the growth of India’s information technology (IT) sector may moderate during the transition phase of a new technology cycle.
According to the report, spending on IT services could grow more slowly than the overall expansion of the United States economy during this period.
Technology Transition May Slow IT Spending
The report noted that the IT services spending multiplier relative to US nominal GDP growth is expected to remain low during the transition phase of the new technology cycle.
This means that even if the US economy grows, IT services spending may not rise at the same pace as seen during earlier technology cycles. Historically, such transition phases have led to temporary slowdowns in IT services growth before the sector regains momentum.
Past Technology Cycles Show Similar Slowdown
Morgan Stanley’s analysis of earlier technology cycles shows that growth in Indian IT services slowed during transition periods before accelerating again. For example, during 2013–2017, the multiplier effect between US GDP growth and Indian IT exports dropped to around 0.9 times, reflecting weaker demand.
However, growth strengthened during the digital and cloud adoption phase between 2017 and 2020, when the multiplier improved to about 2.3 times, and later rose to roughly 2.6 times after the Covid-19 pandemic.
More recently, since mid-2025, during a period of macro slowdown, the multiplier was around 2.2 times. Going forward, Morgan Stanley expects that with the ongoing transition to a new technology cycle, the multiplier could remain relatively low again, similar to earlier transition phases such as the one seen in 2016-17.
GCCs Showing Stronger Growth Than IT Service Firms
The report also observed that revenue growth of India’s major IT services companies has recently lagged behind the broader growth in IT and IT-enabled services exports.
This suggests that Global Capability Centres (GCCs) may currently be experiencing stronger growth compared with third-party IT services providers.
Overall, the report suggests that the Indian IT sector may experience moderated growth in the near term as the industry adjusts to a new technology cycle. Once the transition phase stabilises and adoption of new technologies accelerates, growth in the sector could strengthen again.
(KNN Bureau)
