Contributing 7% to GDP and employing 6 million people, India’s IT sector, once a pillar of middle-class growth, now faces a structural shift marked by layoffs and hiring freezes.

Reasons For the Decline / Layoffs in the IT Sector

• AI-Driven Automation: The rise of Generative AI is automating routine tasks like coding, documentation, and customer support, reducing workforce needs while shifting demand toward highly skilled professionals.
• Restrictive U.S. Immigration and Hiring Policies: H-1B visa costs have increased, and U.S. companies prefer hiring local workers leading to reduced onsite opportunities for Indian IT employees and made deployment of mid-level staff financially unviable.
• Tightening Global Tech Budgets: Economic slowdowns in the U.S. and Europe, which account for a majority of Indian IT export revenue, have forced companies to reduce IT spending and delay new contracts.
• Obsolescence of the Traditional Outsourcing Model: The traditional model of bulk hiring and mass training has declined, as firms now prefer small, agile teams delivering product-based solutions driven by cloud and AI technologies.
• Skill Mismatch: Mid-level professionals with outdated skills face layoffs, while fresh graduates struggle as firms increasingly seek specialized expertise even at the entry level.

Implications for Workforce and Economy

• Job Insecurity: Experienced employees are facing job losses due to automation, and new graduates are encountering delayed onboardings and limited hiring.
• Emotional and Financial Stress: Layoffs without adequate notice periods are leading to mental stress and financial instability among workers.
• Talent Migration: Many skilled professionals are shifting to non-IT sectors such as fintech, consulting, and startups due to better job security and growth prospects.

Way Forward

• Social Protection and Skill Ecosystem: The government must introduce mandatory severance pay, unemployment insurance, and incentivize AI and emerging-tech skilling programs.
• Reskilling: Companies must invest in large-scale reskilling of employees in high-demand technologies like AI, cloud computing, cybersecurity, and data analytics — for instance, TCS has trained 55,000 in basic AI and 100,000 in advanced AI.
• Curriculum Modernization: Universities need to update their curriculum to include hands-on training in emerging technologies and soft skills to ensure industry-ready graduates.
• Promote Startup Ecosystem: India must evolve from a Service Nation driven by cheap labour to a Product Nation powered by Deep Tech innovation, fostering homegrown enterprises and building its own OpenAI-equivalent ecosystem.
• International Engagement: Engage with countries like the US and Europe to maintain trade stability and smooth service delivery

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Conclusion

India’s IT sector is transforming, not declining — shifting from bulk outsourcing to AI-driven, high-skill innovation. With rapid reskilling, policy support, and Deep Tech growth, India can evolve from a service hub to a global digital leader.

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