India’s IT Industry is at Risk: Can It Survive the AI Revolution?

For decades, India’s IT industry has been a key driver of economic growth, providing millions of jobs for engineering graduates. Whether you studied mechanical, civil, or electrical engineering, possessing basic coding skills could land you a job with one of the major IT companies—TCS, Infosys, Wipro, or Cognizant. These companies didn’t require deep expertise in mathematics or advanced computer science; they needed trainable workers who could handle outsourced projects from the US and Europe.

This model worked well for India. A weak rupee made it profitable for global companies to outsource work to India, creating well-paying jobs for young graduates. Many students chose engineering not out of passion but for financial security. The system thrived on low-cost labor, positioning India as the backbone of the world’s IT services industry. However, things are changing rapidly.

AI is Replacing Coders

With the rise of AI-powered tools like ChatGPT, and GitHub Copilot, companies no longer need large teams of coders to write and debug software. AI can generate code in minutes, significantly reducing the demand for entry-level programmers. Many traditional coding jobs are disappearing, and companies will only hire those who can work alongside AI, rather than just writing basic code. Unfortunately, Indian IT firms were never built for an AI-driven landscape. They specialized in outsourcing and maintenance, not in research or product innovation. While tech giants like Google, Microsoft, and OpenAI invest billions in AI, Indian IT firms have spent very little on R&D. Instead of developing cutting-edge AI solutions, they have focused on cost-cutting and mass hiring.

Indian IT Companies Never Wanted Innovation

Unlike their counterparts in the US, Indian IT firms did not place a focus on R&D. It’s not that they struggled to hire top AI talent; they simply never prioritized it. They were content making money through outsourcing work. Instead of building their own products, they relied on low-cost labor to fulfill the needs of foreign clients. For decades, this strategy worked. But now, with AI replacing coders, their entire business model is at risk.

Indian Government’s Short-Term Fix: Weakening the Rupee

As Indian IT companies struggle to secure new contracts, the government has allowed the rupee to weaken to keep the outsourcing model alive. A depreciated rupee makes Indian IT services cheaper for foreign clients, helping these companies maintain their business. However, this is merely a short-term fix. AI is automating outsourced jobs, and no amount of currency manipulation can change that. Instead of adapting to the AI revolution, Indian IT firms continue to seek outsourced AI work, such as AI code maintenance, rather than focusing on creating innovative AI products. This failure to evolve is likely to have severe consequences in the coming years. As AI reduces dependency on Indian IT firms, these companies will face challenges, leading to mass layoffs and rising unemployment.

What Happens to Engineering Graduates?

For years, students enrolled in engineering colleges primarily to secure an IT job, even if they lacked a genuine interest in coding or mathematics. Many Tier II and Tier III colleges trained students just to pass job interviews, often neglecting the development of real problem-solving skills. Now, those jobs are disappearing. If AI can handle basic coding, what will happen to the millions of graduates who prepared for those positions?

Reform or Perish

AI is rapidly transforming the IT industry, and the traditional outsourcing model is unlikely to survive for much longer. Indian IT firms must act fast—invest in AI research, hire real talent, and move beyond maintenance work. They have limited time to change their business models and must operate in crisis mode. If they fail to adapt, it could lead to a significant unemployment crisis. Yet, Indian students, IT companies, and the government remain unprepared for the AI disruption that is fast approaching. The choice is clear: Reform or Perish.

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