With brilliant short term thinking, outsourcers are not hiring the entry-level jobs that once trained generations of programmers and managers and using AI to cut costs.
India's IT industry employs 5.4 million people, delivers eight per cent of India’s GDP, and props up much of the country’s urban middle class. Meanwhile, India’s working-age population is swelling by up to nine million every year. They are entering an economy where services make up 64 per cent of value added but only 42 per cent of jobs.
According to India Dispatch, the top four exporters recruited 225,000 fresh graduates in fiscal 2023. By 2024 that figure plunged by more than 70 per cent to 60,000.
Company filings show that TCS and Infosys added over 157,000 workers in 2022 but just 12,771 in fiscal 2025. For the first time in decades, the giants are shrinking, with TCS losing 13,000 staff and Infosys 25,000 in fiscal 2024.
The axe falls hardest on the tasks AI does better such as code generation, documentation, and testing. Accenture reckons 30-40 per cent of junior developer work can be automated by generative AI. Clients demand lower prices, forcing TCS and Infosys to deliver with fewer humans.
The industry’s workforce is ageing fast. Jefferies data shows Infosys once had 81 per cent of staff under 30. By 2025 that share is down to 53 per cent. At TCS, 70 per cent of employees were under 30 in 2011 but less than 48 per cent in 2025. Wipro and HCLTech tell the same tale, with India Dispatch noting steady erosion across the sector.
Despite productivity gains, the companies are not exactly raking it in. Analysts at Jefferies say EBIT margins will stay flat at around 20 per cent through 2028. Gartner expects non-AI services to shrink by up to three per cent annually, slashing 20 per cent off revenue by 2029. Higher-margin services are being battered by pricing pressure while the business mix shifts to costly onshore consulting.
The new hope is AI consulting, forecast by Gartner and Jefferies to grow 15 per cent a year, but that demands senior experts close to clients, not legions of freshers in Bangalore. Business process outsourcing and infrastructure management offer only scraps, with most savings immediately swallowed by price cuts.
So the big boys are trying to flog AI tools as platforms and switch from billing by the hour to billing by results. Those still clinging to the old graduate-pyramid model are staring at margin erosion with every job AI learns to do offshore.
The impact is bigger than the IT balance sheets. Entry-level IT jobs were the main path from India’s bargain-bin colleges to middle-class life. Now graduate unemployment is stuck at more than 13 per cent, triple the national average, according to official labour market surveys cited by India Dispatch. Meanwhile, 8-9 million workers a year chase maybe 50,000 net new IT jobs between 2026 and 2028.
Policymakers face a nasty choice. Either build mass employment in sectors such as construction and renewables, and rewire education towards AI-complementary skills, or risk stranding millions of graduates between a gutted services sector and a weak manufacturing base.
The Philippines faces the same hollowing-out in call centres, and Eastern Europe’s nearshoring looks equally shaky as automation slices away the bottom rungs of the professional ladder.
India’s tech industry will still compete globally, but the pyramid that turned cheap graduates into middle-class workers is being demolished from the bottom up. What remains is a monument to a model whose time has run out.
