US tariff shock reshapes India’s IT strategy: how disruption is driving resilience

The 50% US tariff hike on Indian exports has sent tremors through India’s IT and electronics ecosystem, forcing manufacturers, distributors, and exporters to rethink sourcing, pricing, and strategy. While the move poses short-term challenges, it has also triggered a structural realignment that could redefine India’s role in global technology supply chains.

As multinational corporations diversify beyond China, India is being viewed not just as a fallback option but as a strategic hub for manufacturing, assembly, and IT services. Yet, this transition demands sustained reform, infrastructure upgrades, and deeper international collaboration.

In an exclusive conversation with DQ Channels, Alok Gupta, Managing Director, Unistal Systems, and President, PCAIT (Progressive Channels Association of Information Technology), offers an insightful view of how the US tariff shock is influencing India’s IT trade, distribution, and long-term strategy.

India’s long-term supply chain role: from reaction to realignment

Gupta believes the shift toward India is not a passing phase. “The recent 50% US tariff on Indian exports has triggered accelerated momentum toward supply chain diversification,” he said.

“While some may see this as a short-term realignment, longer-term trends suggest India will gain a more strategic and permanent role as companies seek to decentralise operations away from China. External trade headwinds and the need for resilience are driving this transformation.”

He added that policy continuity and productivity improvements are key. “India’s potential as a critical hub depends on deepening partnerships with the US and EU, boosting manufacturing capacity, and supporting MSMEs through financial and operational reforms,” Gupta noted.

In his view, India’s success will hinge on how effectively it converts this disruption into a sustainable competitive advantage.

Hardware to services: the great rebalance

Gupta emphasised that the impact of tariffs is asymmetrical; hardware is hit harder, while software and IT services remain largely unaffected. “Tariffs are mostly focused on physical goods. This is pushing Indian companies to accelerate their pivot toward higher-value IT services, R&D, and cloud-based offerings,” he said.

“With hardware margins under pressure, firms are expanding into managed services, cybersecurity, AI, and cloud transformation projects,” Gupta observed. “Hardware still has its place, but the focus is shifting toward value-added solutions and markets less exposed to tariff risks.”

For hardware players, diversification is essential. “Exporters are exploring non-US markets, especially in Asia and Europe, while investing in local manufacturing to reduce import reliance,” he explained.

Managing costs: a balancing act between absorption and survival

When asked how Indian exporters are coping with rising costs, Gupta was candid. “In many segments, neither Indian exporters nor US customers can absorb the full impact of tariff hikes,” he said.

“Exporters are under pressure. Some are absorbing partial losses, offering deeper discounts, and extending payment terms to retain their market presence. Where possible, modest price increases are passed on, but given the inflationary environment in the US, there’s limited room.”

This, he added, has created margin compression across the value chain. “Profitability is under stress, and prolonged tariffs could lead to market attrition if corrective measures aren’t taken soon.”

Customer sentiment: selective caution, sustained digital demand

Despite the disruption, Gupta observed that Indian customers remain resilient and adaptive. “On the hardware side, there’s understandable caution; many are delaying non-urgent purchases,” he said. “But in the IT services space, the picture is very different.”

“There’s genuine resilience here,” he explained. “Clients continue to invest in cloud migration, cybersecurity, and AI projects, seeing them as essential rather than optional. Decision cycles may have stretched, but the commitment to digital transformation remains strong.”

Gupta summed it up succinctly: “We’re witnessing smart, selective slowdown, but also strong adaptability. Customers know staying competitive means staying digital.”

Inventory and sourcing: from stockpiling to smart supply chains

Gupta noted that companies are recalibrating inventory management and sourcing to adapt to the tariff-driven reality. “The way companies approach inventory is evolving. We’re moving toward leaner, more agile models, no more stockpiling just for comfort,” he said.

He highlighted three major shifts shaping India’s IT distribution:

• Local and regional sourcing to reduce exposure to global volatility.

• Predictive analytics to fine-tune demand forecasting.

• Automation and warehouse digitisation to improve responsiveness.

“Real-time visibility and collaboration with logistics partners are now essential,” Gupta said. “The focus is on building a nimble, responsive supply network that can pivot quickly when global conditions change.”

Beyond tariffs: geopolitics and global tech headwinds

Gupta believes tariffs are only part of a larger story. “The US–China tensions continue to drive a ‘China-plus-one’ strategy, which makes India attractive as a secondary hub,” he said.

However, he cautioned that it’s a double-edged sword. “China may respond by dumping cheaper goods into India, disrupting pricing and domestic supply chains,” he explained.

Other factors are also shaping strategy. “Visa restrictions continue to affect talent mobility, forcing Indian companies to rely more on offshore delivery and automation. Export controls on advanced technologies like semiconductors and AI software are another growing challenge.”

He added, “Currency fluctuations, data localisation mandates, and new trade alliances, such as India’s efforts with the EU and APAC, will define our next phase of growth.”

Conclusion: turning disruption into long-term strength

While the US tariff shock has created short-term pain for exporters and distributors, Gupta views it as a strategic turning point for India’s IT industry.

“The disruption is catalysing long-term positives,” he said. “India is becoming a stronger alternative in global supply chains, companies are accelerating their pivot toward high-value IT services, cloud, and AI, and diversification into EU, APAC, and local markets is building resilience.”

Gupta’s message is clear: “The next decade belongs to those who innovate, reform, and collaborate. The short-term turbulence is real, but for India’s IT sector, it’s also the beginning of a more self-reliant and globally integrated future.”

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