Chennai: India’s information technology services industry is undergoing a structural transformation, with Artificial Intelligence breaking the long-standing link between revenue growth and large-scale hiring. Even if IT companies return to double-digit revenue growth in the coming years, the era of mass recruitment is unlikely to return, according to Aditya Jhaver, Director, Crisil Ratings.
Crisil expects the sector’s revenue growth and net headcount addition to remain muted this fiscal and the next. IT services revenues have been growing in low single digits since FY24, reflecting both weak global demand and a fundamental shift in the industry’s operating model.
“The current slowdown is different from previous cycles because of the AI angle,” Jhaver said. “Clients are increasingly asking service providers to deliver the same outcomes with fewer people by leveraging automation and AI-assisted development. This is not merely a cyclical slowdown. It is a structural transition.”
According to him, macroeconomic uncertainty in the United States and Europe, which together account for nearly 85 per cent of India’s IT services revenues, has led to tighter corporate budgets, delayed project ramp-ups and cautious technology spending. At the same time, generative AI has begun disrupting the labour-intensive outsourcing model that drove the industry’s growth for decades.
The biggest impact, however, is on employment. The strong correlation between revenue growth and hiring has weakened significantly. Companies are reducing recruitment for traditional delivery roles while selectively hiring professionals with expertise in artificial intelligence, cloud computing, cybersecurity and data analytics. Net hiring is expected to remain largely flat after virtually no meaningful additions over the past two years.
“The linkage between growth and jobs is unlikely to remain the same in the AI era,” Jhaver said. “Companies can grow without proportionately increasing headcount. The future belongs to professionals who reskill themselves in AI, cloud, cybersecurity and data engineering.”
Campus recruitment has also slowed, with entry-level salaries remaining largely unchanged. “This is more of a structural shift than a temporary cyclical slowdown,” Jhaver said, adding that demand will increasingly be driven by specialised digital skills.
While companies have managed to protect operating margins through cost discipline, lower attrition, tighter resource management and AI-led productivity gains, pricing pressure and higher investments in AI capabilities could weigh on profitability in the coming years.
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