Tata Consultancy Services (TCS), a leading software company headquartered in Mumbai, has announced plans to reduce its workforce by 2%. This move will have a huge effect on the company’s over 600,000 workers. It could too upend India’s $283 billion software sector. TCS ranks high among the biggest IT companies in the country. That’s in part a measure of the overall business sentiment in the sector, which like other industries is grappling with the AI boom and major growth challenges.
As the Indian IT sector is going through a deep crisis on jobs front. As TeamLease Digital, a consulting firm in India, claims, fewer than 150k new-skill jobs had been produced in two years. The industry that previously absorbed about 600,000 new graduates each year has experienced a dramatic turn in employment figures. The top six IT services companies in India reported a staggering 72% drop in net employee additions, hiring only 3,847 new employees in the first quarter of this year.
AI deployment is accelerating across the federal government. With companies driving for lower costs, this is forcing IT companies to become more efficient and less dependent on human capital. This transition leads to an unsettling question of what this means for the workforce now and moving forward in the industry. Arindam Paul, the Tinkerers and Makers entrepreneur and founder of Atomberg Industries, has a message. He argues that the impact of AI on India’s middle class may be “potentially crippling.” He noted that “almost 40-50% white collar jobs that exist today might cease to exist,” suggesting that this technology shift could threaten the very foundation of middle-class stability.
Neeti Sharma, CEO of TeamLease Digital, further elucidated the seriousness of the scenario. Her personal opinion is that 20-25% of new graduates starting today will be left stranded without career paths open to them. Furthermore, she pointed out that “GCCs [global capability centres] will never match the volume of hiring that the IT companies did,” indicating a significant transformation in how job opportunities are distributed in the sector.
Major metros such as Bengaluru, Hyderabad and Pune are already experiencing the ripple impacts of these changes. The dynamic tech epicenters in these communities are currently undergoing dramatic shifts. With rising unemployment, many laid-off workers are transitioning into emerging sectors such as financial technology startups and global capability centres. These sectors are not absorbing nearly enough of the workers displaced by them to replace those IT industry jobs.
This drop-off in employment opportunities is symptomatic of larger growth difficulties in India’s IT industry. Jeffries analysts commented that “aggregate net hiring at industry level has been weak since FY22 [financial year 2022], mainly due to the prolonged moderation in demand outlook.” They further noted that the situation “reflects the broader growth challenges being faced by India’s IT sector.”
Like TCS, other companies are reconsidering the way they build their workforces. They’re making policy decisions to keep key front-line staff and firing the higher level managers. Neeti Sharma explained this trend: “Across IT companies, people managers are being let go while the doers are being kept to rationalise the workforce and bring in efficiencies.” This reorganization reflects a larger trend to simplify its operations to focus more on efficiency as opposed to just frontline headcount.
According to Rishi Shah, these constant technological innovations are making it essential for workforce needs to be reprioritized. He reiterated that companies must first determine whether their resources should be shifted to jobs that enhance AI’s capabilities. This strategic pivot underscores the critical demand facing current employees and future job seekers to adopt new skills. Shifting gears to an ever more automated playing field is the name of the game.