Employing over 5.6 million people and contributing more than 7% to India’s GDP, the sector underpins middle-class prosperity, but analysts warn prolonged uncertainty could curb consumer spending, especially in discretionary areas like tourism, automobiles, housing, and luxury goods
India’s $283 billion IT outsourcing industry is bracing for a major shift as artificial intelligence adoption accelerates, with analysts warning that up to half a million jobs could be at risk over the next three years. The caution comes in the wake of Tata Consultancy Services (TCS) announcing its largest-ever workforce reduction.
The Mumbai-headquartered IT services giant confirmed it will let go of around 12,200 employees — roughly 2% of its staff — mainly from middle and senior management. While TCS attributed the move to a mismatch between existing skills and client requirements, industry observers see it as a sign of deeper structural changes taking hold in the labour-intensive sector.
AI’s growing role in IT delivery
Artificial intelligence tools are increasingly being deployed for tasks ranging from code generation and software testing to customer support and infrastructure management. This shift, experts say, is reducing the need for large teams of engineers and project managers.
“The industry is in the midst of one of its most significant transitions,” said Ray Wang, founder of Silicon Valley-based Constellation Research. “White-collar work, especially in IT services, will look very different in the next five years.”
Roles considered most at risk include people managers with minimal technical expertise, software testers, and infrastructure staff focused on basic network and server upkeep. According to Gaurav Vasu, founder of market intelligence firm UnearthInsight, between 400,000 and 500,000 IT professionals could lose their jobs by 2028, with those having four to twelve years’ experience making up the bulk of the layoffs.
Impact on consumption and workforce morale
The sector employs over 5.6 million people and contributes more than 7% to India’s GDP. Its high-paying jobs have supported a thriving middle class, driving demand for housing, automobiles, and travel. Prolonged uncertainty, analysts warn, could dampen consumer spending, particularly in discretionary segments like tourism and luxury goods.
Some TCS employees have voiced concerns over shrinking performance bonuses, stricter policies on bench time, and delays in onboarding. A 45-year-old employee affected by the layoffs described the decision as “devastating,” adding that finding comparable work at mid-career is proving difficult.
Client demands and competitive pressures
Analysts note that clients are increasingly seeking productivity gains in new contracts, often asking for the same work to be done with fewer resources. “Cost optimisation is now central to winning deals, and AI is amplifying this trend,” said Akshat Agarwal, an analyst at Jefferies.
TCS, which had over 613,000 employees before the cuts, said it is “future-ready,” investing in AI-driven solutions, entering new markets, and restructuring its workforce model. It has not disclosed how many layoffs are directly linked to AI integration.
Industry body Nasscom acknowledged that AI and automation are now embedded in the core of IT service delivery. Former Tech Mahindra CEO C.P. Gurnani said the responsibility to adapt has shifted to individuals: “In past technology waves, change was managed at the company level. With AI, each professional must reinvent or re-skill to stay relevant.”
