TCS layoffs signal AI threat: The disruption that artificial intelligence was expected to bring to the job market has arrived sooner than anticipated. The recent announcement by Tata Consultancy Services to lay off 2% of its global workforce has sent ripples through India’s tech industry. As a bellwether of the sector, any move by TCS often signals what lies ahead for others. This decision comes amidst growing uncertainty—triggered both by global protectionist policies, particularly in the United States, and the rapid evolution of AI technologies.
India’s four largest IT firms—TCS, Infosys, Wipro, and HCL Technologies—collectively employ nearly 1.37 million people. With TCS making the first move, the worry among mid- and senior-level employees is whether their employers will follow the lead set by American tech giants.
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The end of middle class dream
For decades, IT was seen as the safest path to upward mobility in India. Engineering students aspired to enter the industry through hard work, intense competition, and expensive private coaching. That route now appears less certain. With job security no longer a given, and hiring by top firms slowing down, the impact on India’s middle class could be profound—economically and politically.
Globally too, the hiring outlook is dim. Meta and Salesforce have openly acknowledged a reduced requirement for entry-level engineers. As demand softens and margins tighten, Indian IT companies that expanded aggressively after the pandemic are under pressure to consolidate. Layoffs, therefore, reflect more than just short-term shocks—they point to deeper structural shifts driven by automation and changing client expectations.
Cost arbitrage to capability building
India’s traditional edge in IT services has been its ability to supply standardised, low-cost engineering talent for global support roles. But many of these routine tasks, particularly in quality assurance and control, are now being performed by AI. A recent analysis by Policy Circle highlighted that nearly 40% of the testing workforce is vulnerable to automation.
Despite years of producing hundreds of thousands of engineers, starting salaries in the sector have remained stagnant. Now, with AI rendering many entry-level roles redundant, the long-held cost arbitrage advantage is weakening.
TCS layoffs and AI disruption
Yet, not all is bleak. The disruption caused by AI is creating new opportunities in high-value roles such as test architecture, digital governance, consulting, and data analytics. Platform development and tool creation remain relatively insulated from automation. The message is clear: survival in this new landscape will depend on upskilling and moving up the value chain.
Surveys suggest that 68% of white-collar professionals expect their roles to be partially or fully automated within five years. Four in ten fear their current skill sets will soon be obsolete. For companies, this makes investment in workforce retraining not just prudent but imperative.
Firms must double down on reskilling initiatives focused on emerging technologies—AI development, machine learning, cloud infrastructure, and cybersecurity. Shifting human resources away from routine support to specialised functions is the only path to long-term relevance.
A curriculum out of sync
The education system, however, is ill-equipped to support this transition. School and college curricula continue to emphasise legacy programming languages and textbook-level computer science. Very little attention is paid to fast-evolving fields like AI, ML, data science, and cloud security. This mismatch between what is taught and what is needed has become more glaring with every layoff announcement.
Unless major reforms are introduced in the curriculum and pedagogy, the next generation of graduates will remain poorly prepared for an AI-driven job market.
Exploring GCCs, startups
One way forward for young engineers is to broaden their horizon beyond traditional IT firms. Global Capability Centres (GCCs), which now employ nearly 2 million people in India, offer more diversified roles and often better pay. Similarly, India’s growing startup ecosystem—despite its own funding cycles—can absorb skilled professionals in emerging technology domains.
These alternatives, however, are not panaceas. They, too, require a reorientation in skills, mindset, and expectations. But they represent a path out of the narrowing funnel of IT services employment.
TCS layoffs may reflect deeper cycles
It is also worth noting that the current round of TCS layoffs may not be entirely driven by AI. For several quarters, the net hiring numbers at India’s top IT firms have been in decline. Part of this trend can be attributed to correction after the post-pandemic hiring surge. A more volatile global economic environment, reduced IT budgets, and demand-side constraints have also played a role.
Nevertheless, AI has added a new layer of urgency to the restructuring.
The anxiety surrounding TCS layoffs in the IT sector points to a broader malaise—India’s chronic inability to generate enough quality jobs. What is being seen as an IT sector crisis is, in essence, a middle-class employment crisis. The absence of equally lucrative alternatives in other sectors heightens the impact of even modest layoffs.
Unless India diversifies its job creation efforts beyond a few high-growth industries, the economic engine risks running on empty. Creating a wide base of well-paying, future-ready employment opportunities will be central to maintaining growth and social stability in the AI age.”