Those outside India’s IT industry believe it faces a moment of reckoning, with fears that many jobs in the sector will simply disappear as AI takes over. India’s IT czars, however, continue to maintain that such fears are unfounded and the industry will adapt without too much pain. The debate will resolve one way or the other sooner rather than later. In the meantime, the question worth asking is what is at stake for India in this debate. HT parsed
IT sector employment growth peaked long ago
HT compiled employment numbers in the IT sector released by industry lobby Nasscom, and other sources including press releases, research papers and data provider CEIC. The trend is unambiguous: employment growth in the sector peaked years ago. To be sure, the story is anything but unimpressive. Employment in the IT sector increased by 1.8 times between 1996 and 2000 from 0.16 million to 0.28 million. The Y2K boom gave the industry unparalleled momentum in the next decade with headcount rising more than eight times to 2.3 million. The industry almost doubled its headcount again in the next decade, this time on a much larger base. The period from 2020 to 2025 saw employee count increase by 1.3 times. Clearly, the 2000s were the best period.
The story is the same for India’s largest IT companies
Instead of relying solely on headline employment numbers released by Nasscom, HT also looked at company/sector-wise data in the Prowess database prepared by the Centre for Monitoring Indian Economy (CMIE), which covers 38,000 listed and unlisted companies and uses their annual financial statements to collect data on various parameters. HT tried to fill data gaps by sourcing directly from company statements. Prowess’s sector-level estimates, based on around 5,200 firms under the “information technology” sector, show they had around 2.2 million workers in 2024, a number significantly smaller than Nasscom estimates. Ten NIFTY IT Index companies—TCS, Infosys, HCL, Wipro, LTIMindtree, Tech Mahindra, Persistent Systems, Oracle Financial Services, Mphasis and Coforge—employed 1.8 million of these 2.2 million workers in 2024. Since adequate data is only available for the previous 10 years, it is difficult to go back to the pre-Y2K period. However, the data shows that employment growth has been largely stagnant barring a bump in the immediate aftermath of the pandemic. There are increasing reports that IT services companies have already started or are planning to slash their bench strength.
IT as of now is more important for India’s salary incomes than all of central government put together
What is being debated today is not whether the industry will regain its employment growth mojo of the Y2K era. Nobody expects that to happen. What is feared is that AI will eat away a lot of IT jobs, especially those at the very wide bottom of the pyramid. This raises the natural question: how important are IT sector earnings in the larger universe of India’s salary incomes? One way to answer this is to look at the share of IT sector salaries as a share of total reported salaries in India’s income tax returns. The numbers vary depending on how widely one defines the IT industry net. CMIE Prowess data shows that the salary bill—which includes salaries, wages, bonus, Ex Gratia, PF and gratuities – of NIFTY IT companies had a 7.7% share in India’s reported salaried income in ITRs in 2023. If one were to include all IT companies – this would include GCCs as well – the share increases to 25.6%. While its importance has fallen over time from 28% in 2022 to 25.6% in 2023, it is far from unimportant. Just one number puts this in perspective. In 2023, salaries in all IT companies were 3.3 times the total salary paid by the central government and NIFTY IT company salaries were 98% of central government salaries. The data is clear: any significant employment reduction in IT thanks to AI is bound to have a large bearing on India’s white-collar labour market.
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