India's Software Services Grow 9.5% to $239B, Defying AI Deflation Fears

India's software services sector expanded 9.5% to $239.3 billion in the 2025-26 fiscal year, according to the Reserve Bank of India's annual survey of computer software and IT services. The survey collected responses from 2,363 of over 7,500 technology service companies.

Survey Methodology and Overall Revenue

The RBI extrapolated that Indian enterprises paid $221 billion for services in the last fiscal year. This comprises $147 billion for IT services and $56 billion for business process outsourcing (BPO). An additional $26.4 billion was earned by overseas subsidiaries of Indian firms, bringing total revenue to $239.3 billion — a 9.5% increase over FY 2024/25.

Sectoral Breakdown

Software product development generated $56.5 billion, the only segment to decline, dropping by slightly over $1 billion.

BPO grew marginally by $2 billion.

Accounting, audit, legal, tax consulting, and HR services all saw revenue decreases.

Offshore medical transcription and document management demand nearly doubled.

Geographic Markets

The United States remains the largest market, with sales rising to $119.7 billion from $108.3 billion. UK buyer spending increased to $34 billion from $31.8 billion.

Delivery Model

91.7% of services ($203 billion) were delivered off-site, not at client premises.

Overseas Subsidiary Performance

Indian companies' foreign subsidiaries earned $26.4 billion in service revenue, of which $17.9 billion was generated outside India — a $4 billion year-over-year increase.

AI Deflation Warning vs. Actual Data

Major Indian tech service providers had warned that AI could cause market "deflation" — revenue declines as AI replaces human labor. The RBI survey data indicates this deflation has not yet occurred; overall growth remains robust.

Global Ranking Context

The World Bank ranks India as the second-largest IT services exporter globally, behind Ireland. The report notes Ireland's position reflects its role as a legal and financial hub for tech giants, not a comparable offshore outsourcing industry. The top five tech services exporters are the US ($102 billion), China ($73 billion), UK ($65 billion), India, and Ireland.