Why does India’s IT sector throw jobs

The IT sector of India casts jobs and raises difficult questions about what leads to cuts. While slowing global demand is a key factor, analysts also observe how artificial intelligence can be changing roles in the industry, long regarded as a pillar of the country’s economic growth.

The largest private sector employer in the country, Tata Consultancy Services, which employs over half a million IT workers, has announced last month that it will reduce more than 12,000 jobs from mostly average and higher levels of management equal to 2% of its worldwide work force – what it will be Deepest So far.

The CEO of the company and the managing director K Krithivasan attributes the relocation of “Limited opportunities for implementation and non -compliance of skills” not AI. But this does not extinguish the increasing anxiety in the country, As many have been viewed The cuts in a sign of wider and destructive changes in the IT sector, intensified by the growing influence of AI.

TCS and its peers have long rely on the huge low-cost pool in India for software services, a model that is now pressure because AI is ready to automate repeated tasks and since global customers require higher levels of innovation.

The IT sector has long been much sought after by the big pool of engineering graduates in India, which means that any delay will have pulsation effects throughout the economy. India produces over 1.5 million university graduates per year, according to local media reportsS

IT industry contributed approximately 7.5% for the gross domestic product of India in the fiscal 2023.With over 5 million people directly employed in the sector.

Recent profits also painted a sobering picture of the sector’s performance, such as IT specialties such as TCS, Infosys and Wipro Reporting muted growth year from year to yearS

Although this is largely due to the uncertainty about US tariffs which weighed the confidence in the budget of American customersRecent signs of delay in the IT sector of India may be just a “cyclical change” as exports of services to the United States are eased, said Dhiraj NIM, an economist and currency strategist at Anz Research.

However, AI will be “a tendency to comply with the coming years,” Nim added.

New Delhi strives to stimulate growth in labor -intensive production sectors such as electronics, textiles, shoes and toys as part of the strategy for moving the supply chain.

The dismissals also add to the already tense labor market, as the unemployment rate in the country continues to increase. Urban unemployment in India increased to 7.1% in June From 6.9% in May and 6.5% in April. The unemployment rate of youth in urban areas, among those aged 15 to 29, also reached nearly 19% from 17.9% in May and 17.2% in April, according to the Ministry of Statistics.

The problem with the labor market can last for several years, said Anuthuti Sahai, head of South Asia economic research at Standard Chartered, calling on New Delhi to increase his efforts to create more jobs.

She pointed out that most of the job creation so far comes from self-employed sectors where salaries tend to remain lower than salaries.

Economists have called on New Delhi to speed up their efforts in raising their workforce and to overcome the difference in skills to reduce the risk of job displacement. One of five young adults in India participated in AI skill program as per A report Supported by Google.org and the Asian Development Bank.

AI will replace some jobs, but will also transform the nature of existing jobs through “permanent skill”, Nomura Varma said.

The government has introduced internship aimed at skills younger adults with real work experience.

NIM acknowledged that AI could be a threat to jobs, but suggested that whether it would lead to an increase in job displacement would depend on the skill and movement of the work up the skill chain.

In particular, it seems that Infosys outlines a different course of TCS. Its CEO Salil Pareh told CNBC-TV 18 last week that the company rented 17,000 people in the first quarter and plans to hire 20,000 graduates this year, at the same time emphasizing AI, cloud and cost efficiency as key growth engines.

But this may not be indicative of the broader prospects for the sector: Nasscom’s industrial body last month has said that some “workforce rationalization” is expected in the near future, led by the increasing expectations of customers around agility, innovation and speed, with AI and automation becoming central to business operations, according to business operations. local media reportsS

“This change will probably reshape the traditional framework for the provision of services in the near future, it can lead to a certain rationalization of the workforce, as traditional skills sets are reassessed,” Naskom said.

New Delhi should also focus on services and innovation with higher added value and innovation, not focus on low-end routine work, economists said.

“If the economy is unable to adapt, it can lead to job loss, more export of services, moderate consumption in cities,” Varma said with pulsation effects in real estate, retail and auxiliary services.

“This may risk India being trapped in the trap of average income,” Varma added.