This report is from this week’s CNBC’s “Inside India” newsletter which brings you timely, insightful news and market commentary on the emerging powerhouse. Subscribe here.
Millions of techies and engineers who have built India’s multi-billion-dollar IT services industry have a new teammate: artificial intelligence. And embracing this partnership is no longer optional — resistance could mean the end of one’s career.
On Monday, during its earnings call, India’s largest IT company, Tata Consultancy Services, which wants to achieve “AI fluency at scale,” told analysts it now has 217,000 employees that have “higher order AI skills,” up from 180,000 barely a month ago.
TCS is training all its employees on working alongside and with AI. The world’s second largest IT services company told analysts last month that it was particularly keen on hiring “AI natives” — mostly young people adept at using a wide range of modern AI tools in their jobs.
“These people [trainees] really know how to treat AI as a teammate,” Aarthi Subramanian, executive director and chief operating officer at TCS had told analysts during the annual meet on Dec. 17.
White-collar workers have a meeting with artificial intelligence.
Guoya | Digitalvision Vectors | Getty Images
Turns out, it is not the only major Indian company doubling down on teaming up humans and AI.
More than a third of the country’s IT companies are using artificial intelligence for 40% of their core operations, according to a report by India’s National Association of Software and Services Companies, or Nasscom, and job search platform Indeed.
On an average, companies are seeing 25%-35% improvement across important key performance indicators as a direct impact of using AI, the report said.
Almost all (97%) expect work to be done by teams made up of humans and AI by 2027, said the report, based on findings of a survey of 120 human resource heads at IT companies. The paring could be between a person and either an AI tool or an AI agent.
AI will take the lead role in most of these teams, barring a few positions that require human judgment, empathy, and hands-on presence, Sashi Kumar, managing director of Indeed India and Ketaki Karnik, head of research at Nasscom, told CNBC.
Skills challenge
With AI technology evolving rapidly, the key question is: Can employees upskill as quickly as the job demands?
“AI has become one of the most important skillsets for freshers entering Indian IT services companies,” said Sachin Alug, chief executive at global IT staffing firm NLB Services.
Nearly a quarter of all fresher roles now require AI or data-related skills, up from just 5%–10% three years ago, said Alug, adding that AI skilling in India needs urgent attention because the talent gap is widening fast as demand for AI-ready workers grows.
The Indian government’s policy think tank, Niti Aayog, in a report in October said, “Supply for AI talent is now 50% of the current demand in India and is expected to further lag in the next few years.”
Niti Aayog said that in a business-as-usual scenario, “the headcount in the tech services sector could go down from 7.5 to 8 million in 2023 to 6 million by 2031,” but taking corrective action and pushing for AI upskilling could increase the number of jobs in the IT sector to 10 million.
Data shared by TCS on Monday showed that its employee count stood at 582,163 at the end of December, down from 607,979 as of March-end last year. In July 2025, the company had announced it would shed jobs, mostly middle and senior management, citing “skill mismatch” owing to the rising importance of AI.
Macquarie Capital’s IT Services analyst, Ravi Menon, says that firms such as TCS are still hiring and the layoffs are mostly due to a skills mismatch.
He expects net IT sector hiring in the current financial year to be just 1%-1.5% of the existing workforce, but estimates it to rise to 6%-7% in fiscal year ending March 2027 and 7%-9% in the following fiscal year as demand picks up, with AI adoption across businesses becoming a key driver.
But not everyone agrees with that assessment.
“The number of people required to work in IT services in the world of AI will be orders of magnitude lower than where we are currently,” Saurabh Mukherjea, founder and chief investment officer at Marcellus Investment Managers, told CNBC’s “Inside India” earlier this month.
IT services, which have been the biggest job creator in India in the past few years, have been shedding jobs “quite rapidly,” said Mukherjea.
While the future of the IT workforce appears uncertain, its non-human partners are set to thrive as companies increasingly adopt new technologies. The best recourse for humans of IT might just be to upskill and team up with AI.
Top TV picks on CNBC
Goldman Sachs’ Arnab Mitra said that India is starting to see an earning cycle ‘revival’ in 2026, encouraging rotation into the consumer sector.
Sumedha Dasgupta, senior analyst at Economist Intelligence Unit, said the U.S.-India trade deal will come through within the first half of the year.
UTI International’s chief executive said that the crucial task for India’s government is to find a way to create jobs amid layoffs due to the growing use of AI in the tech sector.
Need to know
India’s consumer inflation rate rose to 1.33% in December. Affirming its upward trajectory, inflation climbed for a second straight month after touching record low of 0.25% in October. The increase in inflation was mostly due to rise in price of vegetables, meat and fish, egg, spices and pulses and products.
Infosys raises forecast. One of India’s biggest IT services company, Infosys, has reportedly raised its revenue growth outlook for financial year 2026 to between 3% and 3.5% in constant currency terms from 2% to 3% estimated earlier.
Quote of the week
Foreign investors, from what we understand, are on the edge, waiting for earnings revival in India, and we think in the next two quarters, by the April earnings season, we should see earnings in mid teens, and that should be a trigger for foreign investors to come back in.
— Praveen Jagwani, CEO, UTI International
In the markets
India markets were closed on Thursday.
The Nifty 50 index is down 1.77% so far this year, having gained over 10% in 2025. The benchmark 10-year India government bond yield last at 6.649%.
JPMorgan sees India’s long-term investment story as firmly intact, underpinned by an expanding middle-income population, rising consumer demand, and a relatively stable government with consistent policy priorities supporting both urban and rural communities.
“I think the issue right now is how high valuations are, and [whether] we are poised for correction if earnings do not really come through,” said the bank’s global market strategist, Raisah Rasid.
—Lee Ying Shan
Coming up
Jan.19-23: World Economic Forum, Davos
Jan. 20: Shadowfax Technologies IPO opens
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