Why and how Elon Musk's federal budget squeeze does not mean 'bad news' for Indian IT companies

The recent federal budget cuts led by Elon Musk, head of the Department of Government Efficiency (DOGE), have raised concerns about their impact on various sectors. However, industry experts suggest that Indian IT companies are likely to remain largely unaffected by these changes.
The DOGE's move to cancel some federal contracts could hit consulting-focused technology companies hired by the US government for discretionary projects. However, the Indian IT services industry receives an insignificant portion of the annual US federal spending, accounting for less than 2% of its annual revenue. This suggests that the exposure of the over $280 billion Indian IT industry to US federal contracts is under $6 billion.
Most analysts agree that DOGE's primary authority is limited to federal contracts, whereas a majority of government contracts awarded to Indian IT firms are with state and local governments. This largely insulates them from DOGE's decisions. Data from HFS Research indicates that the US federal government spends an estimated $60 billion a year on consulting fees2. While companies like Wipro and Cognizant have strong consulting businesses, their exposure to US federal contracts remains limited.
For 2025, the US federal budget has proposed spending $75 billion on IT at civilian agencies to help deliver simple, seamless, and secure government services. The President’s budget includes an additional $75 million for the technology modernization fund, an innovative funding model that reimagines how the government uses IT.
Despite short-term uncertainties, Ramkumar Ramamoorthy, partner at tech growth advisory firm Catalincs, believes DOGE’s initiatives are likely to bring about a renaissance in federal government technology spending for global technology players. Indian-heritage IT services players that have built a strong public services business would benefit, as would firms that have invested in local talent and development centers in the US through organic and inorganic means.
In conclusion, while the federal budget squeeze may impact some consulting-focused technology companies, Indian IT firms are expected to face minimal impact due to their limited exposure to US federal contracts.