India’s vital IT services sector, employing about 6 million and contributing 7% of GDP, is experiencing significant disruption as AI technologies begin replacing traditional roles, raising concerns over employment prospects and economic stability.
India’s information technology services industry, long seen as one of the country’s great employment engines, is coming under pressure from artificial intelligence as firms discover that software can now do work once reserved for armies of engineers. The shift is unsettling a sector that employs about 6 million people, contributes roughly 7% of gross domestic product and generates annual revenue of more than $300 billion, according to the Financial Times and industry data.
The threat is not theoretical. One Bengaluru-based Oracle worker told the Financial Times he was dismissed in March after being part of a team building AI tools, only to see the technology accelerate the cuts. He said he applied for hundreds of jobs before finding a new post at a salary far below his previous one. His experience reflects a broader squeeze on middle-class white-collar work, especially as the country continues to struggle with high youth unemployment.
The industry is already trimming staff. Credit rating agency S&P said Infosys and Wipro had cut headcount by 5% to 6% by March from 2023 levels, while similar trends were visible at Tata Consultancy Services and Tech Mahindra. The Nifty IT index has also lagged the wider market this year, underlining investors’ concerns that the old formula of more clients meaning more hires is breaking down.
Executives are openly acknowledging the change. Sandeep Kalra, chief executive of Persistent Systems, told analysts that the link between revenue and staffing will weaken as firms use AI to do more with fewer people. N. Chandrasekaran, chairman of TCS, said in June that AI agents could handle half of the company’s technical roles within three years. At the same time, TCS chief operating officer Aarti Subramanian has argued that the company’s role is shifting towards helping clients choose and deploy the right tools, suggesting the workforce will not disappear so much as be reshaped.
Yet the transition remains uneven. An EY survey found 68% of Indian tech-services executives expect generative AI to have a major impact on their businesses, but 64% rated their organisations’ readiness as low to moderate. EY said the biggest obstacles were skills gaps and unclear use cases, even as it pointed to sizeable productivity gains in application development, support and business process management. ICRA has separately forecast that generative AI deals will expand over the medium term, while a 2024 market report said India’s IT services sector grew 6.4% in the first half of last year, driven partly by digital transformation and AI investment.
The wider employment picture is more troubling. Hiring platform data showed IT job postings fell to a 28-month low in June, and a study cited by the lead report found nearly 40% of graduates under 25 were unable to find work. That is a dangerous combination for a country whose political leaders have promised an AI-led boom in new jobs. The Reserve Bank of India’s chief economic adviser has warned that if India’s outsourcing advantage erodes too quickly, a core pillar of its growth story could weaken just as millions of young people are entering the labour market.
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