Infosys cuts its growth forecast again and its shares fall 4% as AI squeezes India's outsourcing model

What this means

India's IT exporters sell skilled labor by the hour, and AI tools let clients demand the same output for fewer billed hours. That compresses revenue on existing contracts faster than new AI projects can replace it. The exposure runs from IT-services stocks to India's services trade surplus, which has supported the rupee and funded the current account. Domestic lenders such as Kotak draw on a different source, credit growth at home, so India's equity market is splitting between export services and domestic finance. Repeated guidance cuts suggest the market still prices this as a cyclical slowdown. The evidence points instead to structural price deflation in labor-based outsourcing. The closest precedent is the offshoring wave of the 2000s, which permanently lowered prices for US IT services, with India on the winning side that time. The likelier outcome over the next several quarters is more guidance cuts across Indian IT firms and slower growth in services-export receipts. A broad rebound in large contract renewals at stable prices would prove this wrong.