Abeed (name changed), an M.Tech student from IISc, is one month away from finishing his course. After doing his B.Tech in mechanical engineering, Abeed decided to pursue a master’s in an AI-related course at the prestigious institute.
Between 2022 – when he finished his undergrad from an engineering college – and now, things have changed vastly. “Fresher hiring was very good in 2022,” he remembers. However, lately, placements have been sluggish, he says, with whatever existing demand largely concentrated in AI-related roles.
“Big names like Google or Microsoft are either not coming or are hiring in single digit numbers,” says Abeed, who has been offered a job by a startup. “A lot of the recruiters are now startups,” he says.
The demand for the Indian tech talent, predominantly concentrated in Bengaluru, seems to be on a downward slope. Once a lucrative sector for aspirational young Indians seeking upward social and economic mobility, the ITeS sector now seems to be hitting the pause button. According to experts, the shift is structural not cyclical.
A nosedive
According to data from specialist staffing firm Xpheno, the tech sector’s current contribution to total active talent demand is 47%. This is the second time it has fallen below 50% since December 2025. The starkness of this becomes more pronounced when compared against the peak demand the sector saw in as recent as January-February 2022, when it commanded around 87% of all active talent demand in India.
And then began the free fall.
By mid-2023, the demand took a nosedive. Across the world, tech majors started announcing layoffs. In India, IT and ITeS companies began retreating from engineering college campuses where mass hiring across disciplines was once commonplace. A lull in hiring set in, drawing a flat headcount growth from most ITeS companies.
Subdued demand
The Indian IT job market has been largely driven by IT services companies, which employ around 25 lakh people. While the West Asia crisis played a role in the demand drop, the headwinds started well ahead of it. A combination of global economic uncertainty, high interest rates, weaker client spending in key overseas markets, and the correction that followed aggressive post-pandemic hiring contributed to this. The anticipation of AI has been another factor contributing to the sluggish talent demand.
According to Xpheno’s Active Tech Jobs Outlook – India report for May 2026, the Indian tech sector’s active talent demand outlook for the month of May has dropped by 2% compared to the previous month. The report further adds that there are no visible significant changes in the context of the larger tech market that can potentially drive a positive recovery trend in the near term.
The changing workforce
D.D. Mishra, analyst at Garnter, notes that the dream run of IT services companies was long over.
“The industry is moving towards autonomous modes of operation. For a very long time, the kind of profitability and the double-digit growth that the ITeS companies have enjoyed have slowed down,” he says.
Top Indian ITeS companies such as TCS, Infosys, HCLTech, Wipro and Tech Mahindra have reported single digit or negative growth in revenue since FY 2025.
“Labour-based delivery is no longer a very popular mode of doing things. The concept of a low-cost destination may also change over a period of time unless we flip it and make these destinations much more suitable for AI ops, implementing the AI capabilities and driving the AI capabilities along with the clients,” notes Mishra, adding that this disruption, which is long-term, will change the labour market.
He also foresees a change in the organisation structures. The pyramid-shaped staffing structure will give way to a diamond-shaped structure, with a stronger concentration of specialised talent in the middle and relatively fewer roles at the top and bottom.
This is reflected in the Xpheno report too.
According to the report, mid-senior openings account for 48% of all active openings in May 2026, accounting for 52,000 openings. “Opportunities for entry-level tech talent up to two years of experience have dropped to 13K active volume compared to 15K in April 2026. On a YoY basis, entry-level openings show a 19% drop.”
Sanketh Chengappa, director and business head of professional staffing at Adecco India, affirms that he has been seeing this changing demand from his clients.
“Most of our clients come up with requests for people with minimum two years’ experience.”
According to him the demand for roles such as AI/ML engineers, generative AI specialists, data scientists, AI architects, ML ops engineers, LLM specialists, cloud and platform engineers, DevOps platform engineers, cloud security engineers and specialists in cyber security and risk have been rising. However, the talent is in short supply.
No more mass hiring
The tightening of entry-level hiring is echoing in campus placements, where companies once recruited engineering graduates in droves.
Phani Kumar Pullela, Director, placements, RV University, Bengaluru, recollects a question recently posed by an industry person to him.
“They asked me if we have a fresher with two years of experience.” As ludicrous as it may sound, it becomes clearer as he explains. “What they are referring to is whether the student is undergoing a summer immersion or summer internship, if they are doing capstone projects, whether they are done in partnership with the industry and if the student is coming up with three to four internships by the time they complete the third year. Such students are immediately getting jobs.”
In other words, if earlier candidates were provided rigorous training at the companies that recruited them, today they are expected to be ready for the role from day one. This has brought down the volume of the hires, too.
“We get 500 to 700 companies, but they don’t want to hire in large numbers now. Many of them hire in single digits, but look for high-quality candidates and pay them relatively high. We are seeing a maximum of five students being selected per company for packages above ₹10 lakh per annum,” Pullela says.
AI interviewers
Many companies now also seem to be using AI interviewers for the first round of technical interviews. This has not been easy for the students.
Many companies now seem to be using AI interviewers for the first round of technical interviews.
| Photo Credit:
Dado Ruvic
“Students are struggling to pass through this because human interviewers monitor and note parameters other than the technical knowledge, such as attitude, confidence, positivity and so on; Whereas we don’t know what these AI interview tools are coded to look for,” says Pullela.
The challenge on the communication front has also been significant.
“With a human interviewer, your language skills may not matter as much. Previously, even if the students spoke a bit of Hindi or other regional languages, it wasn’t an issue. But the AI interviewers are less tolerant even of the accents,” Pullela notes.
This essentially means that the colleges and universities not only need to prepare the students for future-ready roles during the academic period, but also prep them to survive such interviews.
“Practising with an AI interviewer is very critical. We also have to take care of the emotional wellbeing of the students. With the AI in picture, we need to be prepared for 20 rejections before one success. At RV University, we have the university counsellors. After every five placement rejections, we call the student and the placement officer counsels them.”
Diminishing bargaining power
With the hiring slowdown, layoffs and AI anxiety, the labour market, which went through the ‘great resignation’ during the pandemic period, followed by peak demand, is now at a position of disadvantage.
Employees working within the industry note that people are staying back despite bad working conditions and low hikes because they may not be able to find a job if they leave.
“The oversupply of engineers has significantly reduced the bargaining power of people. Demand is less, and supply is more for entry-level jobs,” says Shweta (name changed), a project manager at the Bengaluru office of a multinational engineering and technology company.
Seeing that most companies are now hiring for data science and AI-related roles, some private colleges, including in Bengaluru, have started offering Bachelor of Engineering Courses in AI and data science, she says.
“In our department, students from such courses are being hired as interns now. Earlier, interns used to be students from IITs and NITs,” says Shweta, who started her career as one such intern.
“For the large majority of other students, a B.Tech or BE alone is not proving adequate anymore to find a job. They have to additionally do some certificate courses in AI. Some others do internships at startups where they pay money to those startups. In a way, it is a failure of the system because this is not how a job market should work,” she says.
AI-washing
On the companies’ front, for the last many quarters, the net headcount growth has been more or less flat. While the top ITeS companies saw an average attrition of around 13% in the last year, the roles were mostly filled in later. Experts question the logic behind the rehires if AI was ready to take over human roles as claimed by many companies while laying off their staff.
“The top seven Indian IT services companies, which together employ about 1.6 million people, have reported nearly flat headcount growth over the last 12 months, even as their average attrition stood at around 13%. This means that of the roughly 2,17,000 employees who exited during the period, companies backfilled nearly 2,14,000 roles, choosing not to replace only about 3,000 employees,” points out Kamal Karanth, co-founder, Xpheno, who adds that the trend is similar even at the top multinational IT companies.
“Choosing to hire people, even if it is for different roles, instead of trying to make those roles work with AI, suggests that the AI impact on business has not come into play as many claim, and the IT Services world is still linear. We don’t have that much AI engineering talent in India to hire, either,” he says.
Karanth, who describes the practice of invoking AI as a cover for job cuts driven primarily by financial considerations as “AI washing”, says that the bigger concern, however, is fresh graduates.
“Last year, the industry absorbed only around 1,20,000 freshers, even though India produces nearly 8,50,000 BE and B.Tech graduates annually, including about 2,50,000 computer science graduates. We can’t even absorb these 2.5 lakh. Many of them take loans and study. Industry is not absorbing them; meanwhile, is saying AI will do all entry-level jobs. This can create socio-economic problems if such large numbers of young graduate engineers aren’t getting jobs, thanks to AI.”
Prepare for future
As conversations around AI’s impact on the labour market evolve, most experts suggest upskilling as the immediate solution to mitigate its disruption.
“It’s the law of the forest. The last animal will always get eaten up. One has to keep upskilling and there’s no two ways about that,” says Thyagu Valliappa, founder of Sona Centre for Advanced Learning & Entrepreneurship (SCALE).
SCALE has been envisioned as an integrated campus housing companies and colleges to promote skilling, innovation, and entrepreneurship, to develop future-ready talent for emerging industries and the evolving requirements of GCCs.
“We have 6,600 engineering colleges in India. And then you’re struggling to find the required talent. That means something is wrong somewhere,” Valliappa remarks.
Mishra of Gartner stresses that there is an urgent need to ramp up the capabilities on the supply side given that the future is heading towards ‘autonomous.’
“What Gartner predicts is that the net job losses will be almost zero going forward because you will need people of a different skill set, who will replace the existing skills… But there will be gap in terms of AI skills demand and supply,” he says, adding that AI skills building and preparedness for AI must go hand in hand.
“That way we will have the right kind of environment to make sure that growth thrives. Around 7% to 8% of our GDP is IT services; we cannot afford to lose that area at this point… This is a fundamental shift. The sooner we embrace it and start re-imagining the future, the better it is for everyone. Otherwise, the change can be brutal,” he cautions.
“The top seven Indian IT services companies, which together employ about 1.6 million people, have reported nearly flat headcount growth over the last 12 months.”Kamal KaranthCo-founder, Xpheno
“For the large majority of other students, a B.Tech or BE alone is not proving adequate anymore to find a job. They have to additionally do some certificate courses in AI”Shweta (name changed)Project manager at an MNC
