Why layoffs are bad not just for the laid off
While Tata Consultancy Services (TCS) attracted a lot of attention in July when it announced that it would lay off 2% of its workforce (12,000 out of around 600,000) by March 2026, many large and mid-sized technology services companies are quietly asking people to resign or find other jobs, according to an ET report. While the total number of layoffs is difficult to quantify, estimates put the number at 25,000 between 2023 and 2024, suggesting the number will double this year.
Layoffs are bad for everyone
While mass layoffs are obviously bad for laid-off employees, they are also bad for India’s economy because India’s economy is based on consumption. Tech industry workers make up a significant number of consumers in top urban centres. It is the backbone of the urban economy in many major cities.
The slowdown in IT hiring and wages poses a growing risk to India’s consumption-led growth model, according to Rajani Sinha, Chief Economist at CareEdge Group. Sinha told ET Now that India’s IT sector, once a major job creator, is now witnessing flat staff growth and slower wage growth. “Employee costs for IT companies increased only 5% in FY25 compared to an average of 15% between FY19-FY23,” he said, adding that both low hiring and slow salary growth were contributing factors.
The Indian IT sector employs millions of people in urban centers such as Bengaluru, Hyderabad and Pune; this makes it central to household income and consumption patterns. “The recession in the IT sector is creating a domino effect,” Sinha said. “A halt to wage growth would impact consumer spending, sentiment and overall economic momentum.” On a global scale, job losses in technology and the rise of artificial intelligence-led automation have triggered fears of an employment contraction that could spread to emerging economies such as India.
While Sinha acknowledged that AI could increase productivity, he also warned that it could replace labor-intensive roles, especially in countries like India where large parts of the workforce remain dependent on service exports. “AI transformation is happening rapidly. India needs to prepare for it through reskilling and R&D investments,” he said. While there has been a slow transition in India’s overall service sector jobs, stress has emerged in jobs in the technology sector. India’s service sector has long been seen as an engine of economic growth. Now he faces a reality check. Although it contributes to more than half of the national production, it employs less than a third of the workforce, revealing the structural imbalance in India’s development story. According to a new report by NITI Aayog titled ‘India’s Service Sector: Employment Trends and Insights from State-Level Dynamics’, services employment increased from 26.9% in 2011-12 to 29.7% in 2023-24, adding nearly 40 million jobs in six years. But this share remains well below the global average of 50%, indicating what the Aayog calls a “slower structural transition.”
Artificial intelligence can also boost job growth
If AI can lead to mass layoffs in India in the short term, it could also help create millions of new jobs in the future, with the right policies.
NITI Aayog recently released a report titled ‘Roadmap for Job Creation in the AI Economy’ and outlined how AI can significantly impact India’s employment landscape. According to the report, artificial intelligence has the potential to create up to 4 million new jobs in the country by 2030, especially in the technology and customer experience sectors. Developed in collaboration with NASSCOM and BCG, the report highlights a mission mode approach to position India as the global hub for AI capabilities by 2035.
The roadmap points out that India’s $245 billion technology and customer experience (CX) sectors are already being disrupted by the adoption of artificial intelligence. It warns that routine roles such as quality assurance engineers and Level 1 support representatives face a high risk of redundancy by 2031 unless urgent action is taken. However, he also states that strategic skill and innovation can turn this disruption into a national opportunity.
The report lists a number of emerging roles in technical and engineering fields. These include the Artificial Intelligence Engineer, who develops tools and processes for AI applications, and the Machine Learning Engineer, who is responsible for creating and developing models that enable AI to work in human-like ways. Other roles mentioned are the Data Scientist, who analyzes and interprets data to support decisions, and the Data Engineer, who manages the infrastructure that enables large-scale data processing. Robotics Engineers and Computer Vision Engineers are also in demand, especially for roles involving automation and visual data interpretation. Natural Language Processing (NLP) Engineers are increasingly needed to improve AI’s understanding of human language.
NITI Aayog’s roadmap highlights several new job categories emerging in the AI economy. Systems Engineers are responsible for designing and optimizing the inputs that guide AI models. AI Ethicists ensure responsible use of AI systems, while AI Trainers create and refine datasets to improve machine performance. The report also notes the need for AI Product Managers, AI Customer Experience Specialists, and AI Literacy Trainers. Experts in the application of AI in healthcare and cybersecurity are gaining importance, including roles such as Artificial Intelligence for Healthcare Professional and Cybersecurity Analyst with AI expertise.
A key pillar of the roadmap is the rise of hybrid and leadership roles in AI implementation. Positions such as AI Application Manager and Human-AI Interaction Designer focus on integrating AI into existing workflows. Business Intelligence Developers and AI Transformation Leaders are also essential to manage strategic direction and align AI capabilities with business goals.
