From the printing press to the steam engine, from electricity to the internet, every wave of technology has made societies fret and question old certainties, rethink economic models and invent new financial and social ideas. Yet through every industrial revolution, humans adapted, adopted and ultimately thrived. Today’s AI wave is different in its speed and breadth, and disruptions like it will become the norm in this century.
For decades, the Indian IT-ITeS sector has been the ladder to the middle class and above, a steady recruiter of young graduates, a constant on equities markets and a quiet assertion of India’s competence on the global stage. Yet, its traditional pyramid model of mass entry-level hiring is giving way to a diamond-shaped structure built around mid-level specialists and deeper expertise.
Since TCS announced plans to lay off up to 12,000 employees, the anxiety has been palpable. While TCS cites skill mismatch and denies AI is the cause, Infosys is instead doubling down on campus hiring and retraining over two lakh staff in AI and cloud. What it really signals is that the first moat the industry built — cost, process discipline and scale — has served its purpose and is now being overtaken by new forces, especially AI.
Yet, the sector does not face this transition empty-handed. Decades of serving demanding global clients have given Indian IT some of the highest corporate governance standards among emerging markets, and competitive ability to navigate complex business demands worldwide. The real question is whether they can now build a second moat: Wider, deeper and harder to breach, based on skill, IP and product leadership.
To see why this is not a simple story of decline, it helps to look back. The IT-ITES industry became a global force by offering reliable, standardised services at a fraction of global cost, powered by an English-speaking coding and software talent pool and disciplined delivery.
Even before AI’s surge, this model had begun to plateau. Net hiring slowed, global clients shifted from volume to value, and industry starting salaries barely changed over a decade. The arrival of commercially usable AI has simply made the need for reinvention impossible to ignore. It is, in a way, like the moment every Indian child knows too well: When the report card brings home bad marks, and a tough conversation with parents becomes the trigger to study harder for the next quarterly exam.
AI need not kill the Indian tech sector. Global demand is rising for cybersecurity specialists, AI operations experts, data engineers and cloud architects. These roles will not hire tens of thousands of freshers each year, but they will pay better, demand deeper expertise and be harder to automate. Instead, by embedding AI literacy (right from middle school) and advanced skills across its workforce, the industry can go beyond cost arbitrage and build higher-value, globally respected services. This evolution comes with trade-offs.
Not everyone in today’s workforce can be retrained for specialised roles, which is exactly what TCS has boldly announced. It is neither practical nor wise to force companies to keep every worker purely as a political or policy gesture. These firms are accountable to shareholders, and long-term strength will come from better returns through innovation.
So what must India do next? First, we must stop measuring the sector’s health purely by the number of freshers it hires. The signs of resilience will now be revenue per employee, the share of digital and consulting in revenue and the creation of home-grown intellectual property.
Second, remember that the sector has rebuilt itself before. From Y2K to ERP, from outsourcing to digital, Indian IT has pivoted repeatedly. What makes AI different is the speed and depth of its impact. This time, it will test whether industry, academia and policy can move together.
Now is the time to invest at scale in skill transformation. This means completely redesigning curricula right from middle school to higher graduate degrees, especially across AI, cybersecurity, chip design and data engineering; funding industry-aligned research; and making lifelong learning real. We need genuine co-creation (and not just collaboration) between industry and academia, teaching problem-solving and interdisciplinary thinking. There is little sense in building new education campuses if what is taught inside is outdated.
And both the Union and state governments must see the merit in the National Education Policy not as a political contest, but as a chance to modernise upskilling and multi-skilling at scale. The goal must be to help the next generation become global citizens, fluent in technology and resilient across domains. India’s demographic dividend still exists, though not forever.
AI will reshape the global economy whether we wish it or not. India already enjoys a reputation as a disciplined, trusted technology hub. It is a strength we can extend to AI by investing in agile regulations on data and ethics, and positioning ourselves as a global centre for “responsible AI”.
The writer is a corporate advisor and author of Family and Dhanda
