Back in the early 2000s, the Indian IT industry symbolized upward mobility for millions of aspiring professionals. Getting an MCA degree or a technical qualification almost guaranteed a high-paying job in an IT company, often leading to opportunities abroad, especially in the United States. Many young professionals not only secured jobs but also settled their entire families overseas — a trend so common that it became the talk of every neighborhood.

Over the past two to three decades, India’s IT industry has experienced phenomenal growth, expanding into a $250 billion sector contributing a staggering 7.5% to the nation’s GDP and creating over 5.8 million jobs. However, the once-glittering industry now finds itself in troubled waters.

Top-tier Indian IT giants like Tata Consultancy Services (TCS), Infosys, and Wipro are reporting a sharp decline in profits. For the March 2025 quarter:

• TCS’s net profit fell 1.6% to ₹12,224 crore.
• Infosys reported an 11.7% drop, bringing its profit down to ₹7,033 crore.
• Wipro, in contrast, reported a 26% increase in net profit, surpassing ₹3,569 crore. However, its CEO warned of looming uncertainty as multiple clients canceled projects during the same quarter.

This isn’t a one-time setback; the industry has been facing a gradual slowdown for the past five years. This has hit not just current employees but also fresh graduates and job seekers aiming for a career in IT.

According to recruitment firms quoted by The Economic Times, IT companies are reducing their hiring targets. Traditionally, firms set annual hiring mandates, but these numbers have been consistently declining. From January to March 2025, talent demand dropped by one-fourth compared to the previous quarter.

The hiring figures for the fourth quarter paint an even grimmer picture:

• Wipro hired only 78 people.
• TCS onboarded 625 new employees.
• Infosys hired just 199 employees.

These are symbolic numbers at best, hardly a sign of robust growth.

What’s causing this downturn?

The primary reason is a decline in service demand. Expeneo’s data highlights a sharp drop in active demand for IT services: from 80,000 open positions in February to 55,000 now. Industry experts are raising serious questions — is this slowdown a temporary phase or a sign of long-term decline? Or did India’s IT companies miss the boat on critical innovation?

Looking back, India’s IT industry was built on groundbreaking practices like the Global Delivery Model, which allowed Indian companies to provide support and services to clients worldwide. Companies also heavily invested in world-class infrastructure and adopted employee-friendly policies. Fresh graduates were trained through intensive upskilling programs spanning 20 to 40 weeks, transforming them into globally deployable IT professionals.

But fast forward three decades, the momentum has clearly slowed.

According to TeamLease Digital, the demand in January-March 2025 has shrunk by 18-20%. Financial Times predicts the IT sector might grow only by mid-single digits this year, somewhere between 4% and 8% — marking the third consecutive year of such sluggish growth.

Several reasons are behind this dramatic shift:

1. Artificial Intelligence (AI) and Automation:AI has emerged as a disruptive force. Indian IT companies, for years, sold the same types of services. However, they failed to invest sufficiently in AI technologies. As clients shift their focus to AI-based solutions, India’s IT firms are left with limited offerings. Startups globally are using AI models like Large Language Models (LLMs) to secure large profits, leaving traditional firms trailing.

2. Lack of Innovation:Indian IT companies mostly focused on their core service business and rarely explored expansion into new, riskier markets. Unlike Amazon, which evolved from a book retailer to an e-commerce and cloud services giant, most Indian IT firms stayed inside their comfort zones.

3. Geopolitical and Tariff Risks:U.S. President Donald Trump’s new tariff plans have further complicated the situation for IT exporters. The concern is that American clients impacted by tariffs will avoid hiring replacements for roles vacated due to attrition, leading to a static employee count — and a freeze in fresh hiring.

4. Tech Evolution Shrinking Service Needs:Previously, deploying a software solution required two to three times its cost in service implementation. Now, cloud computing and AI have drastically reduced these costs, shrinking demand for traditional IT services.

HCL Tech’s CEO, C. Vijayakumar, emphasized the need for Indian tech companies to develop their own AI models to reduce reliance on open-source tools and cushion against geopolitical shocks. He also stressed that the IT industry should shift focus from input-based services to output- and platform-based models for future growth.

Experts also believe that Indian IT companies never took enough calculated risks in tech experimentation. They waited for others to lead, only to follow later — a strategy that rarely works in the long run. This is evident from their lack of proprietary research, patents, or significant AI innovations.

Despite these pressing challenges, the industry’s fundamentals remain sound — strong brand value, solid balance sheets, and experienced leadership. But the need for strategic transformation has never been more urgent. If Indian IT companies wish to stay relevant over the next 30 years, they must embrace risk, focus on R&D, and evolve beyond conventional service models.

Disclaimer:

This article is intended for informational purposes only. It does not constitute financial advice or recommendations. Readers are encouraged to conduct their own research or consult financial experts before making investment decisions. The information is based on reliable sources, but accuracy and completeness cannot be guaranteed.