India’s information technology sector, once a pillar of high-skilled employment and export earnings, is undergoing a disruptive transformation. Industry leaders such as Tata Consultancy Services (TCS) and Wipro have begun trimming headcount, targeting primarily middle and senior management roles. The trigger is twofold: the rapid adoption of AI, which has arrived sooner and with greater impact than anticipated, and a weaker global demand environment shaped by protectionist trends, especially in the United States.
According to staffing firm Xpheno, more than 7,700 professionals with over 15 years’ experience have lost their jobs across companies including TCS, Wipro, Infosys, HCL Technologies, and Cognizant. TCS cited “limited deployment opportunities and skill mismatch” as reasons, but industry insiders acknowledge that pandemic-era over-hiring in FY22 created excess capacity now being unwound.
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The Human Cost
For senior professionals who spent decades believing their positions were secure, the layoffs have been jarring. Nearly 43% of the displaced workforce has moved to other tier-one or mid-tier IT firms, while another 48% have found roles in Global Capability Centres (GCCs). The proportion of voluntary exits versus forced layoffs remains unclear.
The scale of retrenchment is significant. TCS has reduced 2% of its global workforce and plans further cuts of 12,000 mid- and senior-level roles, affecting employees often in their late 40s and 50s—many with two decades in the same firm and expecting to retire within the next 10 years.
AI Reshaping the Job Market
The Indian IT sector employs over 5 million people and contributes about 7.5% to GDP. It has long thrived on a model of low-cost, skilled labour delivering routine services such as coding, testing, and data processing. Artificial Intelligence is eroding this foundation. Tools now automate many of these functions, threatening entry-level jobs that have traditionally been the industry’s backbone.
Mid-level roles are also in flux. Demand is growing for expertise in machine learning, cloud computing, and advanced analytics—skills in short supply among the country’s engineering graduates. With 1.5 million graduates entering the market annually, the gap between outdated curricula and emerging requirements is widening. The unemployment rate among those aged 15–29 has climbed to nearly 19%, underscoring the urgency of reskilling.
The slowdown in IT services has knock-on effects across the economy. Weaker services exports can dampen urban consumption, affecting real estate, retail, and allied industries. India’s urban unemployment rate rose to 7.1% in June 2025, reflecting stress in a labour market already dominated by low-wage, self-employed segments. Without adaptation, India risks slipping into the “middle-income trap,” unable to make the leap to higher-value economic activity.
Policy and Industry Response
The challenge demands coordinated action. Upskilling must be the first priority. While one in five young adults has participated in AI-related training, according to a Google.org–Asian Development Bank study, the scale of need far exceeds current efforts. Government initiatives such as expanded internship programmes should be paired with targeted training in Artificial Intelligence, cloud, and other high-demand fields.
Some companies are responding. Infosys hired 17,000 people in Q1 2025 and plans to recruit 20,000 graduates this year, focusing on AI-driven growth. Industry body Nasscom has called for “workforce rationalisation” to meet client demands for agility and innovation.
From Low-Cost to High-Value
India’s IT sector must evolve beyond low-cost, high-volume service delivery. Firms need to invest in research and development, moving towards intellectual property creation and Artificial Intelligence-based solutions. Public policy can help by incentivising AI research hubs, encouraging public–private partnerships, and integrating emerging technologies into higher education curricula.
Artificial Intelligence is not solely a threat. It will create demand for roles in AI model development, data science, cybersecurity, and domain-specific analytics. India’s large and young talent pool can capture this opportunity—if the right investments are made now.
The recent layoffs are a wake-up call: AI’s impact is not a distant prospect but a present force reshaping India’s most successful services industry. Failure to adapt will erode a source of national pride and economic stability. Decisive action—through reskilling, innovation, and policy support—can position India not as a casualty of the Artificial Intelligence revolution, but as one of its global leaders. The clock is ticking.