India’s largest IT services company, Tata Consultancy Services (TCS), announced plans to cut over 12,000 jobs at middle and senior management levels, reducing its workforce by 2%. This move reflects the company’s effort to become “future ready” amid rapid disruptions caused by artificial intelligence and changing client demands.
TCS, headquartered in Mumbai, employs more than half a million IT professionals and is seen as a barometer for the country’s $283 billion software industry, which forms the backbone of formal white-collar employment in India.
Impact of AI and Skills Mismatch
The introduction of AI automation is reshaping the industry’s traditional labor-intensive business model. Tasks once performed by large numbers of skilled workers are increasingly handled by AI systems, prompting companies to demand new skill sets.
Although hiring in emerging technologies like AI, cloud computing, and data security is rising, it is not enough to offset job cuts caused by the displacement of outdated roles. Industry experts highlight a significant “skills mismatch”—less than 20% of Indian IT professionals currently have AI expertise, despite the projected need for a million AI professionals by 2026.
Economic and Global Factors
The U.S., India’s biggest IT services market, accounts for half of the sector’s revenue. However, Donald Trump’s tariffs on physical goods have introduced uncertainties that have led many American companies to scale back discretionary IT spending. These factors, combined with the rise of AI-driven efficiencies, are driving cost reductions and layoffs in India.
Last year, an estimated 50,000 IT jobs were lost, and the top Indian IT firms experienced a 72% drop in net employee additions. This slowdown threatens India’s broader economy, which relies heavily on the IT sector to absorb millions of new graduates and fuel its growing middle class.
The sharp decline in IT hiring—from 600,000 fresh graduates absorbed annually to roughly 150,000—is forcing new graduates toward alternative sectors like fintech startups and global capability centers (GCCs). Yet, these industries are unlikely to match the hiring scale of traditional IT firms, leaving a significant portion of graduates facing joblessness.
Business leaders warn that reduced IT sector growth could have ripple effects on real estate, consumption, and allied industries, potentially slowing India’s economic momentum.
Author’s Opinion
The rapid pace of AI adoption demands urgent action from both industry and government to invest in reskilling programs and alternative employment pathways. Without this, India risks large-scale unemployment and economic slowdown that could undermine decades of progress in building its technology sector and middle class.
Featured image credit: ILO Asia-Pacific via Flickr
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