NEW DELHI — India's information technology sector is undergoing a fundamental market-driven transformation as artificial intelligence adoption and corporate cost-cutting measures eliminate tens of thousands of jobs, forcing a rapid reallocation of labor and skills across the industry.
The scale of disruption is substantial. Oracle laid off an estimated 10,000 employees in India earlier in April 2026 as part of a wider international workforce reduction focused on cost reduction and increased spending on data centre infrastructure for AI workloads. Tata Consultancy Services shed more than 23,400 jobs, with employee headcount falling to 584,519 in the financial year ending in March 2026 from 607,979 in financial year 2025. Across India's tech ecosystem, close to 40,000 layoffs occurred in the past year or so, according to TeamLease Digital data, including many mid-level managerial roles.
The Structural Market Shift
This is not a cyclical downturn but a structural realignment driven by technological productivity gains. Ms Neeti Sharma, chief executive of TeamLease Digital, characterized the change plainly: "Unlike previous cycles, this is a structural – not cyclical – correction driven by AI-led productivity compression, slower global discretionary tech spending, and a pivot away from legacy services."
The economics are stark. According to industry analysis, if a firm previously required 10 employees for coding and development work, it now needs just one person with AI knowledge to handle equivalent tasks. One laid-off worker, identified as Ms Tanya Gupta (not her real name), explained the employer's perspective: "If an engineer took two days to finish a task, the same thing can now be achieved by AI in less than 30 minutes. So, logically, the company felt it does not need the same workforce size as before." Ms Gupta's contract with an American financial software firm in Dublin, Ireland, was not renewed in 2026 as the company invested more in artificial intelligence.
Mr Ashish Singh, founder of HireMaven, provided additional context on how market conditions accelerated the shift. Indian IT services firms went on a hiring spree after the pandemic ebbed, with salaries doubled or tripled as firms retained talent and hired new workers. However, anticipated projects did not materialize in large numbers amid global economic uncertainty, making large staff "bench strengths" a liability. AI adoption coincided with this contraction, automating basic coding work through AI repositories and autonomous tools, prompting employers to reduce headcounts while investing in AI infrastructure.
Workforce Implications and Talent Gap
The Indian IT sector accounted for around 7.2 million jobs in 2024, but the current disruption raises critical questions about workforce preparation for emerging opportunities. An October 2025 report from NITI Aayog, an Indian government think-tank, projected that AI-driven automation could displace up to two million jobs in India's tech services sector by 2031. However, the same report suggested that if the country strategically skills its workforce, the number of jobs in the sector could expand by around four million in the next five years.
Ms Sharma warned that employees unable to upskill and align themselves to future needs would face challenges in the next 12 to 18 months. The talent demand-supply imbalance is projected to widen significantly. According to a Deloitte report, Indian AI talent demand is projected to grow from around 600,000 to more than 1.25 million by 2027, while the AI market is expected to grow at 25 to 35 percent—signaling a potential talent shortage despite current layoffs.
However, industry experts argue that technological displacement will create new roles rather than eliminate them entirely. Mr Kashyap Kompella, founder of RPA2AI Research, noted: "Their value will shift from code creation to validation, testing, integration, security and production reliability. These are areas where human judgment, context and accountability remain critical. So the technology sector is not eliminating human roles, but we will see a different mix of roles and skills."
New opportunities are emerging in AI, data science, cybersecurity, and cloud computing roles. Additionally, employment is expanding beyond traditional IT services into the data centre ecosystem, which requires technicians, cybersecurity professionals, civil engineers, and energy experts.
Government Response and Skilling Initiatives
The Ministry of Electronics and Information Technology has undertaken several measures to skill the country's workforce in emerging sectors. An estimated 168,000 individuals have been trained in various AI-related courses, and the ministry is setting up labs in Tier 2 and 3 cities across the country to offer foundational-level courses in AI and data-related fields. India already accounts for around 16 percent of the global AI talent pool, though talent gaps remain a concern.
Individual workers are also taking responsibility for their own skill development. Ms Gupta invested in a 12-week online AI-skilling course from MIT Professional Education that cost her around 200,000 rupees, or approximately S$2,700. She stated: "You have to keep yourself upskilled to be relevant in the employment market."
Ms Sharma emphasized the broader implications: "All this is a reality check for Indian families. We need parents and their children to understand the shift in skills and domains that is happening right now in India and pivot into streams other than computer science so that each one stands a better chance at securing employment."
The conventional pathway of studying computer science to become a software developer is no longer sustainable as entry-level coding jobs shrink. Additionally, the traditional strategy of overseas deployment to the United States—where workers could earn significantly higher salaries in US dollars—has diminished due to increased restrictions on foreign worker employment in America.
Why This Matters:
India's IT sector disruption illustrates how market forces and technological innovation drive rapid labor realignment, regardless of government policy. While displacement is real and immediate for affected workers, the broader picture suggests that strategic workforce adaptation can generate net employment growth. The sector's ability to create four million new jobs by 2031—even while displacing two million—depends entirely on workers' willingness to invest in new skills and employers' capacity to deploy those skills productively. This represents a market-driven correction where individuals bear responsibility for their own economic relevance, and government's role is primarily to facilitate skills training rather than prevent technological adoption. The success or failure of this transition will determine whether India maintains its competitive advantage in global tech services or cedes ground to other nations better positioned to navigate AI-driven transformation.