UPSC Syllabus Topic: GS Paper 3 – Indian economy.
Introduction
India’s IT sector still drives growth and aspiration, but the model is changing fast. Layoffs, AI-led automation, visa costs, and tight client budgets are reshaping work. The sector must shift from scale to skill, and from services to solutions. Clear policy support, large-scale upskilling, and fair worker transitions are essential to protect jobs and sustain momentum. India’s IT dream is at a crossroads.
Current Status of IT Sector in India
- GDP contribution and outlook: The IT sector contributed around 7.5% of GDP in FY23, with projections to reach ~10% by 2026.
- Employment scale: The sector employs nearly 6 million people.
- Export revenue trajectory: Export revenue is predicted to reach $224 billion in FY25. According to a NASSCOM report, total IT revenue could surpass $300 billion in FY26.
- Domestic digital adoption: With over 760 million internet users, domestic demand for digital products and services is a major growth driver.
- Government supports: Key enablers include 67 Software Technology Parks of India (STPIs), 100% FDI, and the National Policy on Software Products (NPSP).
Major Concerns of IT Sector in India
- Layoffs signal structural change: Firms are trimming quietly through “silent layoffs” such as performance-linked exits and delayed promotions. Over 50,000 jobs may go by year-end. Global cuts add pressure (Amazon ~14,000; Meta ~8,000).
- Automation reshapes routine work: AI now handles reporting, coordination, and basic coding. Agentic AIperforms multi-step tasks, lifting productivity and shrinking team sizes.
- Visa costs push localisation: Higher H-1B costs and tariff threats make onsite deployment of low- and mid-level roles uneconomic, so firms hire more locally overseas.
- Clients demand lean: Budgets in the U.S. and Europe are tight. Buyers want cloud, cybersecurity, and generative-AI outcomes from smaller, expert teams.
- The old “assembly line” model fades: Mass hiring with basic coding and quick deployment no longer works. Clients seek complete solutions, fast delivery, strong architecture, and solid security.
- Skills gap at mid-career: Many advanced through managerial tracks rather than deep technical skills. Legacy stacks (e.g., SAP ECC, mainframes, non-cloud tools) lose value as AI covers many routine tasks.
- Social and career insecurity: Experienced workers are leaving, fresh graduates face long waits, and companies rush to retrain. A once-stable sector now brings income shocks, and many workers lack strong safety nets during this transition.
Way forward
- Mass AI upskilling: Make AI literacy the baseline. TCS trained ~550,000 in basic AI and ~100,000 in advanced skills. This scale should be the norm through public-private action.
- Job-ready education: Move beyond rote coding. Teach machine learning, product thinking, and ethics in AI. Build communication, collaboration, and critical thinking. Graduates must be job-ready for AI, cloud, data, and cybersecurity.
- Product and deep-tech push: Support AI startups, deep-tech labs, and innovation hubs. Shift from only services to products that create higher value and new jobs.
- Stable rules and global access: Give policy clarity on data, trade, and compliance. Work with partners to ease visas so firms can deploy talent where needed.
- Fair transitions and support: For large layoffs, mandate 6–9 months’ pay as a cushion. Offer career counselling, mental-health help, and retraining subsidies so workers can re-enter quickly.
- Coordinated execution: Align government, industry, and campuses on timelines and metrics. Track outcomes and course-correct.
Conclusion
India’s IT base is strong, but the certainty is gone. The path forward is skills first, product-led growth, clear rules, and worker protection. If these steps scale now, the sector can move from manpower to mindpower and stay globally competitive in the AI age.
Question for practice:
Examine the major concerns facing India’s IT sector and suggest key measures that can help strengthen it in the age of AI.
Source: The Hindu
