The fall in the IT sector would impact other allied services and industries, as well as the real estate sector, said a Chennai-based mutual funds (MF) distributor. This comes after Tata Consultancy Services’ (TCS’) decision to lay off 2 per cent – 12,000 – employees made headlines, bringing down with it the BSE IT index on Monday morning. TCS declined 1.26 per cent to Rs 3,094.90.
MF distributor D Muthukrishnan, said the IT sector proved to be a significant reason for creating upwardly mobile classes in India, as well as many affluent NRIs in the last three decades. Where IT sectors lapped up fresh graduates who studied engineering ‘reasonably well’ by tens of thousands, now it has dropped to a few thousands every year.
“Real estate and premium consumption flourished only due to IT professionals. Indian IT companies earning billions of dollars were very content and didn’t invest in any breakthrough innovation or become future ready by working on AI,” he said despite many analysts predicting the downward slope for the IT sector.
TCS’s decision to lay off 12,000 senior and mid-level employees, Infosys not hiking salaries, engineering graduates who got placement letters last year but are yet to receive their joining dates, point to one thing – all’s not well in the IT sector. Muthukrishnan said that staff are no longer allowed to remain on the bench for more than a month, and are simply laid off.
“I don’t know how we are going to create millions of high paying jobs. Both centre and states should focus on job creation and also bring in high value jobs, he said. “Fall in IT would negatively impact many allied services and industries, crash real estate and give a big blow to premium consumption. Tough time for policy makers to find a way out of this,” he said.
TCS CEO K Krithivasan described the layoff decision as a hard but necessary step. The job cuts represent one of the largest workforce reductions in TCS’s history. Most affected employees are mid-to-senior level staff, with some junior-level workers also impacted, especially those who have been on extended bench time. Krithivasan clarified that the move is not due to AI productivity improvements but because some employees’ skills no longer align with the company’s requirements.
Krithivasan explained that the old waterfall method involved multiple leadership teams, but this is changing. The layoffs will be carried out gradually over the financial year 2026 and are not limited to any specific geography or domain. The decision is based on skill and capability gaps.
