AI to Dent IT Services Sentiment, Boost Broader Economy: Kotak Equities

• Artificial Intelligence (AI) may gradually disrupt India's IT services sector and dampen spending sentiment among tech professionals, says Sanjeev Prasad of Kotak Institutional Equities.
• Uncertainty about job stability could lead IT households to slow discretionary spending and long-term commitments like housing loans.
• Broader employment impact may be limited as IT services employ only 1% of the workforce, but high IT worker income means a slowdown could moderately affect the economy.
• AI can boost overall economy via better credit assessment, pricing, lower NPLs, and enabling more digital initiatives within fixed IT budgets.
• Potential structural shift: IT professionals moving to core engineering or manufacturing, requiring a stronger policy push for manufacturing to leverage AI disruption.