TCS Layoffs Signal AI-Driven Job Shakeup: Up to 500,000 Indian IT Jobs at Risk, Experts Warn

Tata Consultancy Services (TCS.NS) has announced it will cut more than 12,000 positions, the largest job reduction in its history, in a move that experts say could herald a wave of AI-driven layoffs across India’s $283 billion outsourcing industry. While TCS attributed the decision to “skill mismatches” rather than automation, analysts believe artificial intelligence is accelerating structural changes that could cost the sector as many as 500,000 jobs within the next two to three years.

India’s Largest Private Employer Feels the Shift
The layoffs amount to roughly 2% of TCS’s 613,000-strong workforce, with about 12,200 middle and senior management positions affected. The company has historically been a major employer for India’s engineering graduates, helping to build a large middle class since the IT boom of the 1990s.

Despite TCS’s assertion that the cuts are not directly linked to AI adoption, industry watchers say the timing and scope reflect a deeper transformation. “We are in the midst of a massive transition that will transform white-collar work as we know it,” said Ray Wang, founder and chairman of Silicon Valley-based Constellation Research.

AI Disrupting the Labour-Intensive IT Model
From coding and manual testing to customer support, AI is increasingly performing tasks that once required large teams of skilled workers. As of March 2025, India’s IT sector employed 5.67 million people, contributing over 7% to GDP and influencing everything from home sales to car purchases through its multiplier effect.

But UnearthInsight founder Gaurav Vasu warns that the sector’s role as a “jobs sponge” for engineers is under threat. “About 400,000 to 500,000 professionals are at risk of being laid off over the next two to three years as their skills don’t match client demands,” he said, adding that 70% of those affected will have 4–12 years of experience.

The most vulnerable roles include:
People managers with minimal technical knowledge
Software testing staff responsible for bug identification and usability checks
Infrastructure managers who handle basic tech support and network maintenance

Ripple Effects on the Economy
Job losses in the sector could have wider economic consequences. “This fear stemming from TCS layoffs may hurt consumer demand for tourism, luxury shopping and even delay long-term investments such as real estate,” Vasu said.

TCS and peers such as Infosys, HCLTech, Tech Mahindra, Wipro, LTIMindtree, and Cognizant collectively employ more than 430,000 professionals with 13–25 years of experience, a group staffing firm Xpheno’s co-founder Kamal Karanth calls “the big fat middle layer.”

Clients Push for Cost and Productivity Gains
Analysts say the pressure is coming not just from technology but also from clients seeking better cost efficiency. “With cost optimization being the key driver for new deal wins, clients are asking for productivity benefits, a trend growing with AI adoption. This requires IT firms to do more work with the same number of employees or the same work with fewer employees,” Jefferies analyst Akshat Agarwal said.

TCS’s “Future-Ready” Strategy
In its July announcement, TCS said it was preparing for the future by investing in emerging technologies, expanding into new markets, deploying AI at scale for clients and internally, and realigning its workforce model. The company did not respond to questions on whether AI adoption played a role in the layoffs or why redeployment was not possible.

For many affected workers, the impact is personal and immediate. “This is very devastating news,” said a 45-year-old TCS employee from Kolkata who lost his job. “It is very difficult for people my age to get new jobs.”

Morale Takes a Hit Inside TCS
Even those still employed report declining morale. A Pune-based employee cited mediocre performance bonuses for senior staff, a stricter “bench policy” limiting the time without a project, onboarding delays, and the uncertainty created by the layoffs. “All these developments have tanked the morale of mid-career folks like me,” they said.

Read More - NPPA Caps Prices of Common Drugs - What It Means For Your Medical Bill

A Slowing Growth Engine
The outsourcing sector’s revenue growth has slowed as inflation and U.S. tariff uncertainty prompt clients to delay spending and demand cost control. Nasscom, the industry body, acknowledged the shift, saying, “The tech industry is at an inflexion point, as AI and automation move to the very core of how businesses operate.”
Former Tech Mahindra CEO CP Gurnani noted that ,unlike past technological disruptions, AI puts the burden on individuals rather than organisations. “With AI, for the first time, the onus is on the individual to reinvent or re-skill themselves,” he said.

The Road Ahead
The TCS layoffs may prove to be an early warning for India’s IT workforce. As AI adoption accelerates, industry veterans say continuous upskilling will be essential to survive in an environment where productivity gains increasingly come from machines, not manpower.

For now, the “big fat middle layer” is in the crosshairs, and the sector that built India’s white-collar middle class faces a challenge unlike any before.

(With Inputs From Reuters)