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AI is reshaping India’s software industry at a time when unemployment among young graduates is rising, leaving many families reconsidering the long-held belief that a software job is the surest route to middle-class prosperity.
For more than three decades, large Indian software exporters such as Tata Consultancy Services (TCS) and Infosys have helped lift millions of households out of poverty. Jobs in the sector were associated with modern workplaces, strong pay, and opportunities for overseas assignments.
But the industry’s labor-intensive model is being challenged as AI automates parts of coding and software testing. As a result, clients are increasingly seeking payment tied to output efficiency rather than hours worked.
Francisco D’Souza, former CEO of Cognizant, warned that companies could face major difficulties expanding if they continue to bill by the hour after AI cuts the time needed to deliver work.
Nikkei Asian Review reported that leaders at India’s top software firms are tempering expectations. K. Krithivasan, CEO of TCS, said traditional businesses will gradually shrink, while AI-related roles may partly offset the decline. TCS revenue fell 2.4% in the last fiscal year.
At Infosys, CEO Salil Parekh acknowledged declines in areas where AI platform models can handle work effectively. C. Vijayakumar of HCL Technologies warned that around 40% of the industry could be disrupted, with a potential CAGR slump of 3–5% in the coming years.
The changes are beginning to show in staffing charts. For the first time in years, headcount at top firms is not growing rapidly. At TCS, the workforce contracted 3.9% in the fiscal year ending March, while Infosys saw headcount growth slow significantly.
Phil Fersht, CEO of HFS Research, said AI is eroding the traditional “pyramid” model that depended on a large base of lower-skilled workers. He argued the industry needs to move toward a “diamond model,” with fewer junior workers and greater emphasis on mid-level AI-trained specialists who can supervise processes, resolve complex cases, and translate leadership ideas into operational reality.
Fersht warned that the bottom of the pyramid is not narrowing but collapsing. He also noted downstream effects, including fewer supervisory roles for mid-level managers if lower levels shrink.
This transition is described as bad news for about 6 million tech workers in India and for millions of students enrolled in engineering programs across the country.
An estimated 8.36 million students have enrolled in engineering programs in the past five years. As major software players reduce hiring, the article says the entry path for new graduates is narrowing.
It also links the worsening tech labor outlook to youth unemployment. Azim Premji University data show 11 million graduates aged 20–29 were unemployed in 2023, up from 4 million in 2011. The share of graduates among unemployed youth rose from 44% to 67%.
The article adds that because average salaries at leading software companies are often many times higher than GDP per capita, a decline in earnings in the sector would directly affect private consumption, a key driver of economic growth.
Returning to Rajdeep Palchowdhury, the article says he is delaying buying a large house that had long been his plan. More importantly, it reports that he no longer pushes his son to pursue technology at all costs.
Source: Nikkei
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