Trump’s Next Target? India’s IT Industry — And It’s Time We Respond.

Donald Trump’s policies may soon hit India’s IT sector — possibly through duties, fines, or tighter visa restrictions. Giants like TCS, Infosys, Wipro, and Cognizant could be in the firing line. More pains are awaited, and most importantly, the large giants are not making investments. They are more focused towards fatty executive pay cheques, fatty bonuses, shareholders' dividends and share valuations. This is dragging the whole industry across many sectors, and IT is no exception to the same.

The Indian IT industry has created an atmosphere where the baton has been passed to the U.S companies, where we are just enjoying the fruits of being a cheap supply of manpower. This has become redundant.

We ignored cloud infrastructure and let every major provider be American. We kept drones banned until 2021, handing the market to US and Chinese players. We over-regulated crypto into irrelevance, ceding blockchain innovation and mining to the same two geographies. Now, as the world races ahead in LLMs, we are watching from the sidelines while Big Tech and the CCP pour billions into AI dominance.

The deeper problem: Indian IT majors sit on massive cash reserves, preferring to hand them out as dividends instead of funding bold, risky, long-term R&D. Where are the investments from the Indian IT industry compared to shareholders' wealth creation?

In the 2023-24 financial year, Indian IT firms generated approximately $20 billion (₹1.74 lakh crore) in free cash flows, with over 75% returned to shareholders through dividends and buybacks.

Rising H-1B visa rejections and uncertainties around work visas have forced Indian IT firms to hire more local U.S. workers, which has thinned their profit margins but reduced some outsourcing-related job displacement.

The real impact, however, will likely fall on employees. Despite sitting on billions in cash reserves, these companies have historically underinvested in innovation and product development. When pressure mounts, the usual playbook is cost-cutting — layoffs in India, reduced salaries — to “protect margins.” Just a small example will clarify that the private sector is not making investments. India’s IT hardware market exceeds $40 billion, yet 65% of it is met through imports—77% of which come from China. The domestic market has ample demand and scale to justify local manufacturing, especially with Production Linked Incentives (PLIs) on offer.

If we look at the numbers, we find that during Covid, Remote work demand, cloud migration, and digital transformation projects led to unprecedented hiring spikes during FY20–FY22.

Indian employees in the BPO and KPO sectors are more concerned about AI-driven job losses than their U.S. counterparts, with 50% fearing job displacement compared to 33% in the U.S. This reflects the high susceptibility of repetitive tasks in these sectors to AI automation.

A global slowdown in IT spending—most pronounced in BFSI and technology clients—is further squeezing growth. In parallel, tightening visa norms in the US, coupled with geopolitical headwinds, are curbing offshore hiring opportunities. The result: slower deal flows, leaner project pipelines, and pressure on margins.

In effect, this behaviour could serve US interests by weakening India’s economy and government — something Trump might see as a strategic win.

This is where the Government of India (GoI) must step in. If these companies choose short-term savings over long-term resilience, they should be mandated to:

• Deploy idle cash into startup funds
• Invest in university-led research
• Build world-class products that compete directly with American offerings

A Trump-led tariff war could either cripple our IT industry or push it to finally evolve. If we use this moment to reorient toward innovation, R&D, and tech self-reliance, the long-term gains for India could be significant. The Indian IT industry needs to understand that we cannot enjoy forever being a cost-competitive country, and further to that, when you have become the 4^th largest economy, you have many enemies now, hence India’s growth responsibility lies in our hands. Until the Indian private sector expenditure begins, India cannot sustain or grow to become the 3^rd largest economy. China has grown since it made investments. Enjoying only fat pay cheques and paying dividends to shareholders can't make India grow. If today the Indian IT industry invests in new products and R&D, then Donald Trump would not have dared to impose 50%. More job cuts are bound to happen, and the Indian IT industry will have to pay the price of underinvestment in R&D of new models.