New Delhi, Aug. 25 -- Artificial Intelligence-led productivity gains could result in annual revenue deflation of 3 per cent to 3.5 per cent in the Indian IT services market through FY2028, with new AI-driven demand unlikely to offset the pressure before FY2029, according to a sector report by Kotak Institutional Equities.

Kotak said the revenue deflation would come as IT companies use AI to deliver existing work more efficiently and pass productivity benefits to clients through lower costs, while new AI-related business remains too small to offset the impact on the much larger existing revenue base.

"Our best estimate is that the deflation phase runs through FY2027-28 and the crossover begins around FY2029," Kotak Institutional Equities...