Technology Sector Trends - Newspaper Summary

 The sources illustrate that in October 2025, the Technology Sector in India is undergoing a profound transformation, driven by the explosive growth of Artificial Intelligence (AI) and its subsequent regulation, shifts in the IT services business model due to client demands, and the rapid expansion of digital commerce and retail media within the broader financial and economic landscape.

I. The AI Revolution and Regulatory Response

1. AI as a Strategic National Priority and Investment Focus: India is heavily focused on AI, viewing it as a major driver for structural gains across the economy.

• Massive Infrastructure Investment: Reliance Industries Ltd (RIL) is planning a major push into AI through a new subsidiary, Reliance Intelligence. Morgan Stanley estimates that RIL may spend approximately $12–15 billion over the next few years on AI infrastructure, including building a giant 1GW data center. This investment is expected to reshape RIL's equity story and unlock value across its energy, digital, consumer, and media verticals. RIL is also collaborating with Google to establish a dedicated cloud region in Jamnagar, combining RIL's infrastructure with Google's AI and cloud technologies.
• Technological Adoption: India is positioned as a historically strong adopter of technology, having successfully leveraged Digital Public Infrastructure to transform from a "data poor" to a "data rich" society at low cost. The same trajectory is expected with AI, where traditional and new businesses can leverage it for structural gains.
• Venture Capital Focus: Global investment firms, including Prosus and Accel, are specifically targeting early-stage ventures that push the frontier of technology, business, or product innovation under a new accelerator track called Atoms X. Prosus recognizes that the world will look "completely different, five, six, even seven years from now" due to technological change. Accel's eighth fund, a $650 million corpus, targets enterprise-grade Artificial Intelligence (AI), among other sectors.

2. Regulatory Crackdown on AI Content (Deepfakes): The Indian information technology (IT) ministry has proposed amendments to social media intermediary guidelines specifically to address the rising threat of deepfakes and manipulated media.

• Mandatory Tagging and Watermarks: The draft rules mandate that any platform creating and distributing AI content must use watermarks and invisible tags or 'metadata' to identify the content as AI-generated.
• Visible Disclaimer Requirements: Creators are concerned about the proposed disclaimer rule, which requires AI-generated content to carry a disclosure on '10% of the visible surface area'. For text, this means at least 10% of the words must disclose AI generation, and for an image, 10% of its resolution must feature a watermark.
• Industry Opposition: Creators, including musicians and artists, argue the rule ignores the use of AI in conjunction with human skills and may "destroy the creative effect," potentially hindering the adoption of AI for commercial purposes.
• Accountability of Foundational AI Developers: The rules extend accountability to foundational AI providers such as OpenAI, Google, and Anthropic, clubbing them under the same regulation as social media intermediaries for the first time. This implies platforms must become more stringent in tracking users who generate misinformation and may need to take action against those accounts. Technically, the Centre has consulted tech firms, which expressed confidence that tagging AI content is possible through voluntary disclosures or at the source of generation.

II. Shifts in IT Services and Business Models

3. AI's Impact on the IT Services Industry: The IT services industry is at a "moment of reckoning" due to AI-driven shifts in client expectations and workforce structure.

• Muted Growth and Pricing Pressure: Leading players report muted revenue growth and stubbornly flat margins despite securing large deal wins. Clients are demanding up to 30–40% fee discounts, arguing that AI-driven efficiency gains should directly translate into lower delivery costs.
• Need for Work Reinvention: AI adoption is not just about using more tools, but about redesigning work from the ground up. Leaders must shift commercial models toward outcome-linked pricing, shared risk, and faster time-to-value (TTV).
• Workforce Pyramid Hollowing Out: AI is absorbing transactional work, causing the base of the traditional workforce pyramid to hollow out. New roles must focus on cross-functional problem-solving, orchestration, and innovation oversight. For example, a call center redesign using domain-specific bots enabled the handling of the same call volumes with an 80% lower headcount.
• Coforge Example: Coforge Ltd, a mid-cap IT firm, saw its gross margin expand partly due to "automation and AI-led benefits". However, unlike peers like Tata Consultancy Services (TCS) and HCL Technologies, Coforge has "refrained from talking AI numbers".

4. Navigating US Immigration and Talent: Changes in US immigration policy, specifically the higher H-1B visa fees, are challenging Indian IT firms.

• Coforge, which derives 58% of its revenues from the US, reported a sequential 15% increase in sub-contractor costs in Q2 FY26, indicating this as a potential strategy to navigate the tighter immigration policies.
• Bipartisan US lawmakers are opposing President Trump’s executive order that raised H-1B visa fees to $100,000, calling the move harmful to US competitiveness, which impacts Indian IT firms that rely heavily on these visas.

5. Competition in Foundational AI Models: The rivalry between OpenAI and Anthropic highlights two distinct strategies in the AI market.

• Anthropic's Corporate Focus: Anthropic, backed by Amazon and Google, has a "clearer path to making a sustainable business out of AI". It is "laser-focused on these agentic enterprise use cases", providing its Claude model for corporate customers to devise money-saving uses in areas like coding and drafting legal documents. Anthropic has a $7 billion annual run rate and expects to reach $9 billion by year-end, leading OpenAI in revenue per user.
• OpenAI's Mass Market Challenge: OpenAI, backed by Microsoft, mainly caters to the mass market and relies on subscription fees (like the $20/month "plus" plan). However, the sources note that such subscription fees are currently not enough to offset the massive cost of developing and rolling out cutting-edge AI.

III. Digital Commerce and Retail Media Trends

6. E-commerce and Quick Commerce Surge: E-commerce remains a strong growth driver, particularly hyper-local delivery platforms (quick commerce) in India.

• Multinational consumer goods companies, including Unilever and L’Oréal, reported a doubling of sales in India, attributing the success partly to the rapid rise of hyper-local delivery platforms. Unilever’s quick commerce business in India is "more than doubling this year".
• Consulting firm Kearney estimated that the quick commerce grocery business alone will triple between 2024 and 2027 to reach ₹1.5–1.7 trillion, expanding to all towns with over 5 lakh population.

7. Rise of Retail Media: Digital advertising revenues are diversifying beyond the "duopoly" of Meta and Google.

• Market Growth: Retail media—advertisements on e-commerce, quick commerce, and online retail platforms—is surging in India, estimated to be worth $1.5–2 billion this year.
• Dominance Shift: Retail media grew to 18% of India’s total digital advertising business (estimated at ₹70,000 crore in 2024), overtaking ad revenues in entertainment and sports. Amazon’s ads revenue crossed ₹8,000 crore in FY25, while Flipkart's jumped past ₹6,000 crore.
• Data Monetization: Retailers are recognizing that they are sitting on a "goldmine of data" and are actively building new business lines around it. Firms like Zepto (which runs its own analytics tool called Zepto Atoms) are leveraging retail data to help brands plan and target campaigns effectively. The Trade Desk is building a cross-platform ad layer above India’s retail giants to enable brands and publishers to buy/sell ad space using these commerce-driven insights. A retailer or payment aggregator "need not invest any money in monetizing their data".