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For nearly three decades, India’s Information Technology (IT) sector has been the crown jewel of the country’s economic transformation — a symbol of upward mobility, global relevance, and middle-class aspiration. Though the IT industry recruits only about 1% of the Indian workforce, it contributes about 7% of the country’s GDP. Young engineers from Tier-II towns once saw a job at Infosys or Tata Consultancy Services (TCS) as a passport to prosperity. But today, that dream is flickering. With TCS announcing its steepest-ever layoffs — nearly 20,000 jobs shed in a single quarter— and other companies quietly following suit, the question arises: Is IT no longer the golden calf for aspiring tech professionals?A profound metamorphosisThe answer is complex. India’s IT sector is not collapsing, but it is undergoing a profound metamorphosis — one that demands urgent attention, strategic recalibration, and a renewed commitment to future-ready skills. The ‘Layoff Wave’ is a symptom of structural change in the industry. It is happening in the U.S. too: Amazon has announced it would reduce its corporate workforce by 14,000, thanks to deployment of AI. Meta is laying off 8,000. In India, TCS’s decision to cut 3.2% of its workforce, primarily targeting mid- and senior-level roles, is not an isolated event: other IT majors are doing similar things. Industry estimates suggest that over 50,000 IT jobs may be lost by the end of the fiscal year. IT insiders say these are not likely to be mass firings in the traditional sense, but ‘silent layoffs’ — performance-linked exits, voluntary resignations, and delayed promotions that quietly trim the workforce without triggering headlines.The reasons are manifold. First, AI-driven automation is reshaping the very nature of IT work. Routine tasks — reporting, coordination, basic coding — are increasingly handled by algorithms. The advent of models from companies such as OpenAI and Anthropic, alongside the rise of Agentic AI — autonomous systems capable of reasoning and executing multi-step tasks, is fundamentally disrupting India’s IT services sector by automating routine work, drastically improving developer productivity, and shifting the industry’s focus towards high-value, AI-driven digital transformation. While AI can never replicate human beings’ capacity for empathy or emotion, these tasks do not require such qualities and can be performed without human intervention.Second, U.S. immigration policies have grown more restrictive, with the hike in H-1B visa fees and tariff threats prompting Indian firms to localise their overseas workforce. Indian IT firms simply cannot pay $100,000 to get a low- or mid-level professional to the U.S. to execute tasks that would not rake in such a level of profit.Third, client budgets are tightening, especially in the U.S. and Europe, where economic uncertainty has led to cautious IT spending. In short, the outsourcing model that once relied on scale and cost arbitrage is being replaced by one that prizes specialised expertise, lean teams, and AI fluency.The end of the Assembly lineIndia’s IT sector was built on the back of a simple promise: hire thousands of engineers, train them in basic coding, and deploy them to serve global clients. It was a digital assembly line — efficient, scalable, and profitable. But that model is now — let us be blunt — obsolete.Today’s clients don’t want armies of coders; they want solutions. They want cloud-native architectures, cybersecurity frameworks, generative AI integrations. They want fewer people who can do more. And they want them fast. This shift has exposed a skill mismatch in the Indian IT workforce. Many mid-career professionals, promoted for managerial ability rather than technical depth, now find themselves ill-equipped for the new demands. Legacy skills — SAP ECC, mainframes, non-cloud platforms — are less relevant. To take just one example: SAP ECC (SAP ERP Central Component) is the core of SAP’s traditional enterprise resource planning (ERP) software suite, the digital backbone that helps large organisations manage their day-to-day business operations across departments. Today AI can replicate the skills needed to operate it. Mastery of that component is no longer such an indispensable asset in an IT professional. The question arises: fine, but what else can you do?The result is a painful churn: experienced workers being let go, fresh graduates struggling to find entry points, and companies scrambling to retrain their staff. In the face of this rapid technological shift, the government should consider requiring IT companies engaging in mass layoffs to provide a mandatory 6-9 months’ salary as a compensation package, offering a crucial safety net for workers suddenly losing their livelihoods and needing to secure new skills for the evolving job market.And yet, all is not lost for our IT sector. India’s tech proficiency still commands global respect. It contributes over $280 billion to the economy, employs nearly 6 million people, and powers digital transformation across industries. But the sheen of guaranteed success — the idea that a tech degree equals a stable career — is fading. For young professionals, the path is no longer linear. A computer science degree is not enough. One must master AI, data science, cloud computing, and cybersecurity — and keep learning. The days of coasting on basic Java or .NET (or even SAP ECC) are over.From retrenchment to reinventionSo, what can we do? If India wants to retain its IT edge, it must act on multiple fronts. For policymakers, the challenge is to reimagine skilling. India’s engineering colleges must overhaul their curricula. Government programmes must incentivise AI literacy, not just digital literacy. And industry must invest in reskilling, not just recruitment.The first obvious task is AI ‘upskilling’ on a very large scale. TCS has already upskilled over 550,000 employees in basic AI skills and 100,000 in advanced ones. This must become the norm, not the exception. Public-private partnerships can accelerate this effort.Along with this, the need for urgent curriculum reform is imperative. Engineering education must move beyond rote coding. Courses in machine learning, ethics in AI, and product thinking should be mainstream. Soft skills — communication, collaboration, critical thinking — are equally vital.Our startup ecosystem will need greater support from the government and from venture capitalists. India’s tech future lies not just in services but in products. Supporting AI startups, deep-tech ventures, and innovation hubs can create new jobs and diversify the sector. The government must engage with global partners to ensure visa access, data sovereignty, and trade stability. Protectionism abroad must be matched with policy clarity at home.For those laid off or displaced in the current churn, severance pay is not enough. They will need career transition support, mental health resources, and retraining subsidies. The Indian IT industry has never felt the need for social safety nets before, but the time for them is now.The Indian IT story is not ending — it is evolving. From manpower to mindpower, from outsourcing to innovation, from quantity to quality, this change is challenging but unavoidable. The transition will undoubtedly be painful. But it can also be purposeful.We must stop measuring success by headcount alone. It is no longer about the number of bright Indians employed in IT. Instead, let us ask: Are we building solutions that matter? Are we empowering workers to thrive in the AI age? Are we telling a story of resilience, reinvention, and relevance? I asked friends in the know if the bloom is off India’s IT rose. Their answers suggest that the rose may have lost some petals, but its roots are deep, and its bloom can return — if we nurture, water and fertilise it with vision, skill, and courage. This will need policy leadership. But there is no reason yet to lose hope.Shashi Tharoor, Member of Parliament for the Thiruvananthapuram constituency in the Lok Sabha and Chairman, Parliamentary Standing Committee on External Affairs
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