Impact of Artificial Intelligence on India's Infotech Sector

Context

The Indian IT industry, which generates revenues of $280 billion and employs over 5.8 million people, is going through a transformational phase. Artificial Intelligence (AI) is transforming jobs, business strategies and work processes. Recent announcements by TCS have created concern in the industry, reflecting the impact of AI and the need to adapt.

Recent announcements by TCS

• TCS has put a freeze on hiring experienced employees and plans to lay off 12,000 employees.
• The company had 6,07,979 employees as of March 2025.
• The announcement is a message to the stock market, employees and customers that cost optimization, AI-based efficiency and skill development should be the focus.
• According to experts, TCS is an industry indicator that underlines the need to adapt in the AI era.

About India's Infotech sector

• The Indian IT sector is the backbone of the global digital identity that made India the 'back office of the world'.
• Companies like TCS, Infosys, Wipro lead it.
• The sector contributes significantly to GDP and exports and is driven by skilled talent, government digitalization support and startup ecosystem.
• The focus is now on expertise and cutting-edge technologies rather than scale.

Impact of AI

Productivity boost

• AI is improving productivity by more than 30% in the software development lifecycle.
• Coding assistants, code generation tools and intelligent debuggers enhance efficiency.

Broader Impact

• AI reduces human errors in testing and maintenance and provides data-driven insights.
• Global spending on AI infrastructure and development is expected to exceed $1 trillion by 2025.
• AI is impacting all sectors from customer service to boardroom decisions.

Impact on Indian firms

• Indian firms can provide data cleansing, modernization of legacy systems and compliant AI solutions.
• Global companies are struggling with legacy infrastructure and poor data quality; Indian firms can play a key role in fixing these.
• AI and low-code platforms are changing organizational structures by allowing faster work with fewer people.
• Indian firms can help clients adopt AI, making them indispensable partners.

Challenges

• AI is impacting jobs as it allows faster work with fewer people.
• Advantages of scale are diminishing and smaller AI-native firms are innovating in sectors such as healthcare, defence, fintech.
• Developers need to focus on strategic judgement, ethical consideration and creative problem-solving.
• Global regulations such as the EU AI Act complicate compliance.
• Human skills remain unaffected in areas such as C++, OS, gaming but adaptation is required in others.

Way Forward

• Indian IT sector must adopt AI as a core competency.
• Shed the old image to become a global leader in intelligent automation and digital innovation.
• Developers must evolve as observers and collaborators, with an emphasis on math and imagination.
• The TCS situation is a call for adaptation and evolution, not a negative signal.
• Strengths such as people, processes and predictability can take the sector to new heights.