The Indian IT services sector, a cornerstone of the nation’s economy and a multi-billion dollar industry, is undergoing a profound transformation driven by the rapid integration of artificial intelligence. For the millions of tech professionals and engineers who have powered its growth, embracing AI is no longer a strategic advantage; it’s a prerequisite for career survival.
Tata Consultancy Services (TCS), India’s largest IT services firm, is at the forefront of this shift. In a recent earnings call, the company announced that its workforce with “higher order AI skills” has surged to 217,000 employees, a significant increase from 180,000 just a month prior. TCS is actively engaged in upskilling its entire workforce to foster collaboration with AI, even prioritizing the recruitment of “AI natives” – young individuals already adept at utilizing modern AI tools.
“These individuals understand how to treat AI as a teammate,” stated Aarthi Subramanian, executive director and chief operating officer at TCS. This sentiment is echoed across the industry. A report by the National Association of Software and Services Companies (Nasscom) and job search platform Indeed reveals that over a third of India’s IT companies are leveraging AI in a substantial portion of their core operations. The impact is tangible, with companies reporting a 25% to 35% improvement in key performance indicators directly attributable to AI implementation. Projections suggest that by 2027, nearly all IT companies (97%) anticipate their work being conducted by hybrid teams of humans and AI. While AI will likely spearhead most of these collaborations, human attributes like judgment, empathy, and a physical presence will remain critical for specific roles.
However, the accelerating pace of AI evolution presents a significant challenge: can employees acquire new skills as rapidly as job demands shift? Sachin Alug, CEO of global IT staffing firm NLB Services, notes that AI and data-related competencies are now essential for a quarter of entry-level positions, a stark rise from 5%-10% just three years ago. This widening talent gap underscores the urgent need for enhanced AI skilling initiatives in India.
A report by Niti Aayog, the government’s policy think tank, highlighted that AI talent supply currently meets only 50% of India’s demand, a deficit expected to grow. Under a business-as-usual scenario, the tech services sector’s headcount could potentially shrink from 7.5-8 million in 2023 to 6 million by 2031. Conversely, strategic upskilling in AI could propel job creation to 10 million within the sector.
TCS itself has seen a dip in its employee count, standing at 582,163 in December, down from 607,979 in March. The company had previously cited “skill mismatch” due to the rising prominence of AI as a reason for workforce reductions, particularly in middle and senior management roles. Ravi Menon, an IT services analyst at Macquarie Capital, suggests that while these layoffs are often attributed to skill gaps, firms like TCS continue to hire. He forecasts modest net hiring of 1%-1.5% for the current fiscal year, projecting an increase to 6%-7% by fiscal year 2027 and 7%-9% the following year, driven by broader AI adoption.
This optimistic outlook is not universally shared. Saurabh Mukherjea, founder and chief investment officer at Marcellus Investment Managers, expressed a more cautious view, suggesting that the number of personnel required in an AI-driven IT services landscape could be significantly lower. He observes that the IT services sector, historically a major job creator, is already experiencing rapid job shedding.
As the future of the IT workforce remains a subject of debate, the integration of AI is an undeniable reality. For professionals in the sector, the most prudent strategy appears to be continuous upskilling and embracing collaboration with AI as a key pathway forward.
**Key Developments:**
* **Infosys Raises Growth Forecast:** One of India’s leading IT firms, Infosys, has reportedly revised its revenue growth outlook for fiscal year 2026 to a range of 3% to 3.5% in constant currency terms, an increase from its previous projection of 2% to 3%.
* **Consumer Inflation Rises:** India’s consumer inflation rate climbed to 1.33% in December, marking the second consecutive month of increase, primarily driven by higher prices for vegetables, meat, fish, eggs, spices, and pulses.
* **Market Sentiment and Valuations:** Praveen Jagwani, CEO of UTI International, noted that foreign investors are awaiting an earnings revival, anticipating mid-teen earnings growth in the next two quarters, which could trigger renewed investment. JPMorgan’s global market strategist, Raisah Rasid, acknowledges India’s strong long-term investment narrative but cautions about high valuations and the potential for a market correction if earnings forecasts are not met.
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