Kavya (name changed), one month pregnant and mother to a five-year-old, unexpectedly found herself unemployed after an alleged instance of forced resignation by her former employer, Tata Consultancy Services (TCS).
Presented with only two options — resignation or termination — after being called in for a discussion with the HR, she was compelled to choose resignation, completely against her will, she says.
Another former employee, who was undergoing training for a client’s project, received communication that the project team had been asked to release him. Later, he was called in for a one-on-one discussion with the HR, who asked him to tender his resignation or face termination. Only recently married, the incident has put him under severe pressure.
Yet another allegation comes from a former employee who claims to have received zero support from his superiors despite providing documentation and hospitalisation records for his medical condition. According to him, he was forced to resign in the last week of July, and his last working day was declared as the same day, without any notice period or transition support.
Allegations of forced resignations against TCS, and the company’s recent announcement that it would be releasing 2% of its global workforce, have sent shockwaves across the 20 lakh IT/ITeS workforce in Karnataka. Many feel that what is happening at the TCS, once known for its employee-friendly policies and stable jobs, is an indication of bigger disruptions to come. They fear that soon more companies will follow suit, leading to a churn within the $260 billion industry, whose wheels are turned by one of the largest labour forces in the country.
A paradigm shift
The Indian IT/ITeS worker is no stranger to layoffs and retrenchments. However, it rarely proved to be the end of careers for anyone. But what is happening now seems to be more structural than a temporary phenomenon, many feel.
“The problem currently seems to be in the middle layer. The layer which is now old in terms of technology and was purely doing people management will be the most impacted.” Biswajeet MahapatraA representative of Forrester
“Earlier, layoffs used to happen because overall the markets were not doing well, or there was a dullness in the economic sector. But now the layoffs are happening because there’s a paradigm shift in the IT industry itself,” says Biswajeet Mahapatra of Forrester.
It was on July 27 that TCS issued an internal circular announcing its plans to release around 12,000 employees in its mid to senior levels. Two days later, on July 29, came a statement from the industry body NASSCOM, which observed that the tech industry is at an inflection point.
“Over the next several months, we anticipate some transitions as organisations pivot toward product-aligned delivery models, driven by rising client expectations around agility, innovation, and speed. This shift is likely to reshape traditional service delivery frameworks and, in the near term, may lead to some workforce rationalisation as traditional skillsets are re-evaluated,” said the statement from the company which highlighted AI and automation as the reason.
However, AI is only part of the story, others say.
Geopolitical issues and GCCs
Macro headwinds, such as wars and U.S. president Donald Trump’s tariffs, have dampened the overall demand and reduced the discretionary spending of large enterprises across the globe, says Kamal Karanth, co-founder of Xpheno, a specialist staffing company. Added to this are the global layoffs by tech giants themselves.
“Large product companies like Google, Microsoft, Amazon and Meta and many others put together have also laid off about 1.2 lakh employees in the last two years. Indian IT Services companies have had a large exposure to these brands, which has also reduced their wallet share,” Mr. Karanth notes.
According to him, the rise of freelancers or gig platforms, which now have reached a revenue of close to $7 billion and are growing at a Compound Annual Growth Rate (CAGR) of 19% is eating away at the technology spend of American and European enterprises.
While the FAANG (Meta – formerly Facebook, Amazon, Apple, Netflix and Google) shed their weight in the U.S., in India they added the net staff at their Global Capability Centres in India. This meant that a lot of work which would have otherwise gone to the Indian companies now started flowing to the in-house GCCs. India hosts around 1,700 GCCs, with Bengaluru accounting for around 29% of them. This roughly translates to more than 450 GCCs that pose stiff competition to the services companies in Bengaluru.
The AI effect
Historically, most Indian IT and ITeS companies, such as Infosys, TCS, Wipro and others, followed a linear growth model where revenue growth was closely tied to headcount growth. Hiring more employees meant the ability to take up more projects and earn more revenue. The labour-intensive companies benefitted immensely from the cost arbitrage.
However, at a recent report launch by EY and NASSCOM, where representatives from companies such as Infosys participated, there seemed to be consensus that the industry is looking at a future where growth would be decoupled from headcount, thanks to AI and automation.
Global clients who expect cost efficiency and automation have been mounting pressure on the Indian services companies.
“The IT spending is not increasing because there’s confusion in the international market due to external reasons. There is also the expectation of AI to do a lot of the jobs for which people were employed earlier. Many companies have almost removed the bench strength,” notes Mr. Mahapatra.
Notably, TCS recently introduced a bench policy restricting the duration of hours on the bench for an employee to 35 days annually. There have been allegations that the forced resignations are mostly targeted at employees on the bench.
“Earlier employees on the bench were considered a strength as it meant the company had people readily available to take on newer projects. But that is changing now,” notes a mid-management TCS employee, who didn’t want to be named.
Profit maximisation
Not everybody entirely buys the AI story, though.
Karnataka State IT/ITeS Employees Union (KITU), which currently has an active membership of 12,000 employees, feels AI is often used as an excuse for layoffs.
“As per our understanding, AI in the Indian IT sector still hasn’t reached a stage where it would result in the elimination of job roles”Suhas AdigaKITU general secretary
“As per our understanding, AI in the Indian IT sector still hasn’t reached a stage where it would result in the elimination of job roles. What companies are doing is profit maximisation by laying off people in the mid to senior management who earn relatively higher salaries,” says Suhas Adiga, general secretary of KITU.
“If AI is coming for multiple job roles, why are the layoffs targeting only mid-management roles? If it was the impact of AI, shouldn’t roles at various levels have been affected?” he questions.
Mr. Karanth too notes that the disruption due to AI has been minimal.
“Take the example of TCS alone. Last year, the attrition was 12.5%. On a base of 6 lakh people, about 75,000 people exited the company. But if you look at their head count now, they are almost back at the same level, which means they have replaced almost everyone who exited. That means there is no impact of AI yet,” he notes.
A mid layer problem
TCS’s layoff announcement, unprecedented and uncharacteristically loud, has got the industry talking. Many fear that it will have a snowball effect and more companies will follow suit.
“The problem currently seems to be in the middle layer,” notes Mahapatra. “The layer which is now old in terms of technology and was purely doing people management will be the most impacted.”
According to Mr. Karanth, there are about 5 lakh people with more than 15 years of experience in the top six IT services companies in India. These consist of tech experts, domain experts, client experts and team managers. While companies have seen 12% to 17% attrition in the junior level (1 to 4 years of experience), in the mid to senior level, it has been only 4%. At the time of stress, the axe comes for the people managers.
“As per our understanding, when about a lakh people get hired yearly, about 15,000 get laid off yearly. These layoffs at junior levels don’t impact the industry much, as people will quickly find new jobs. But in the case of TCS, most of the people who are being targeted now have been there for years. It is difficult for them to find new projects for their skillsets,” Mr. Adiga says.
More layoffs
Amid all the din and beyond the semantics of ‘rationalising’, ‘transitions’ and ‘inflection points’, what seems to be clear is that layoffs would continue.
According to layoffs.fyi, 80,945 tech employees have been laid off by 179 tech companies across the globe in 2025. In Bengaluru alone, the number stands at 33,294.
“There’s a lot of confusion and my expectation is that the layoffs will continue,” says Mr. Mahapatra. “Some may happen openly, some may happen behind the scenes. AI may be used by many organisations as a pretext to do the layoffs and trimming, even if both are not connected.”
What makes it a double whammy is that the industry is not only expected to see more layoffs, but is also looking at a hiring slowdown.
“An anticipation of AI disruption to rule based repeatable tasks like testing and similar skills has put the IT Services companies in a cautionary mode on hiring,” notes Mr. Karanth, who also feels that the hiring slowdown also needs to be seen in the context of the sluggish performance if the top ITeS companies in the stock market for almost a year.
Impact on workforce
What does all this mean for the Indian IT worker?
For those who lost their jobs, it could mean uncertainty and stress. For the freshers and juniors workforce, a chance at new AI roles. For the existing workforce, reskilling and even added work pressure at times.
“IT industry runs on a shortage of about 6 lakh employees as per their own estimates. Every project runs on a shortage of 2 to 3 people and that is why people are being forced to work overtime without pay. But the companies are able to get away with it as the government is not holding them accountable,” says Mr. Adiga.
KITU has filed an Industrial Disputes case against TCS for alleged forced resignations and mass retrenchments. The Labour Department has initiated conciliatory meetings and has reportedly asked the company to maintain status quo by invoking Section 33 of the Industrial Disputes Act.
The net count
After accounting for both the elimination of redundant roles and the creation of new AI-augmented positions, what is going to be the net impact on employment compared to today?
“I think the net count will be negative,” says Mr. Mahapatra. According to him, as AI becomes more streamlined, new roles will emerge, but the industry may not create mass job opportunities like it used to. While reskilling is one of the ways to address the problem, creation of AI-related roles in sectors apart from IT & ITeS is another, he notes.
“The strength lies in building our own products. We cannot depend only on IT companies. There are areas such as manufacturing, automobiles, aviation, defence, space and aerospace where AI can do wonders and AI-augmented job roles can open up.”
The fading allure
The role of the IT industry in the rise of the Indian middle class and their upward social mobility in the last two decades is undeniable. But Mahapatra feels the allure of the industry may fade going forward.
“Earlier, many people who didn’t understand or like programming would still get into IT because there is money in it. But now It is becoming mainstream. In the coming days, people who have an affinity for IT technologies, data, data sciences and AI will get into it. IT is not going to be that flashy green Mercedes car on the road which everybody would want to ride, it will be just another regular car.”
But an immediate turbulence seems imminent. Given that the industry has been absorbing around 2 lakh people every year on average, even a reduction of 10 to 20% is going to send waves across the job market.
Law enforcement paramount
To keep the upheaval under check, law enforcement with regard to labour rights in the industry should be stricter, say employees and unions. An RTI document reveals how the Karnataka government renewed the exemption from Standing Orders for the sector despite a dissent note from the labour department that highlighted multiple violations by the companies.
Saurabh Bhattacharjee, co-director, Centre for Labour Studies, NLSIU, notes that even the laws that apply to the sector have not been enforced in the strictest manner. However, he notes that Karnataka is not an exception and most States show a reluctance to implement labour laws strictly when it comes to IT services.
“If you are in India, a job in IT is not much of a choice, but more or less the only option for the masses for upward social mobility; Because where else is the job?” asks Mr. Adiga, stressing on the unemployment indices in the country.
“The need to regulate this sector is, hence, paramount. It cannot continue to be lawless at the expense of employees for long. Not regulating the sector means leaving one of the largest labour forces in the country in uncertainty.“
