As AI rewrites billing models, could India’s IT exports lose momentum?

Fund managers at the PMS-AIF World Crystal Summit say AI-led pricing shifts in IT services could temper export growth, with ripple effects on the current account and consumption.

• AI-led pricing shifts may slow Indian IT export growth
• Fund managers warn of risks to current account and consumption
• Manufacturing exports and ER&D firms seen as bright spots

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At a time when Indian IT stocks are grappling with weak deal flows and margin pressure, fund managers at the PMS-AIF World Crystal Gazing Summit said artificial intelligence-led shifts in pricing models could cap export growth from the sector, keeping the risk of spillovers to the current account and domestic consumption firmly on the radar.

While India’s broader growth story remains intact, and manufacturing exports show pockets of strength, panellists highlighted the potential for slower IT services exports if the industry’s traditional time-and-material billing model gives way to output-based pricing — a transition they say is already underway as AI adoption deepens.

IT export growth tapering a concern

Addressing the panel on macro risks, Praveen Kumar, fund manager at  AlphaGrep Investment Management, said the most meaningful challenge to India’s growth trajectory in the medium term could stem from the IT services sector. “IT services are a huge part of our exports and that helps us offset the deficit that we run as an economy,” he noted, adding that if export volumes stagnate or taper, it could have knock-on effects on both the current account and consumption.

Kumar framed this not as a sudden shock but as a structural risk that markets need to price appropriately, especially at a time when global demand for traditional services contracts is soft. He cautioned that while businesses will adapt, the scale and timing of the transition remain uncertain.

Quant models reflect transitionary phase

From a market positioning perspective, Kumar said quant strategies are seeing rotations away from secular growth themes toward more industrial and value-oriented pockets, including capital goods, metals and select financials. Given the lack of persistence in factor signals and heightened noise in data, he said this phase calls for diversified positioning rather than aggressive sectoral bets.

Quant models, he explained, adapt over time to new data inputs but not without lag — a reality that makes risk management critical during periods of elevated volatility.

Manufacturing and exports remain bright spots

Despite concerns around IT exports, Sanjaya Satpathy of Ampersand Capital Trust, highlighted sustained strength in segments such as auto ancillaries, capital goods and electronics components. He attributed part of this momentum to free trade agreements and an undervalued rupee, which has supported export competitiveness.

Satpathy also pointed out that recent data show services exports overtaking manufacturing exports, underlining India’s growing importance in global tradable services even as the country works to scale up its manufacturing base.

Portfolio positioning amid AI disruption

AI-driven disruption in technology has also led to portfolio recalibration. Manoj Bahety, cofounder and poe Carnelian Asset Management, said exposure to traditional IT services companies has been reduced, while allocations to engineering and R&D (ER&D) players have been retained.

According to Bahety, while global investments in large language models have surged, the real monetisation opportunity for Indian firms lies at the application layer, where AI tools are deployed to solve enterprise-level problems using unstructured data.

Sentiment remains cautious

On investor behaviour, the panel noted that market sentiment has remained subdued over the past 15–18 months despite supportive macro indicators such as steady GDP growth and healthy credit expansion. With uncertainty around global trade, AI disruption and earnings visibility, fund managers said markets appear to be moving through a transition phase rather than a clear directional trend.

PMS AIF WORLD is India’s leading wealth services firm specialising in alternative investments, serving over 800 clients across ₹2,200 crore in PMS and AIF assets. The firm follows a knowledge-first philosophy with the belief that when knowledge leads, wealth follows, and it focuses on delivering well-informed investing for its alpha seeking clientele.