Indian IT services firm, Tata Consultancy Services (TCS), has announced that it plans to implement a 2% workforce reduction in fiscal year 2026. According to the firm, the changes will only affect personnel in its middle and upper management.
The Indian company says the slash will see its 613,000 workforce reduced by 12,200 employees. It also assured its clients that the upcoming change would not affect its services, as it plans to implement it with caution.
Indian tech firm makes move to cut workers
According to reports, the firm intends to prioritise AI, new market opportunities, and coping with unpredictable demand. In a statement released by the CEO, K. Krithivasan, the company has already started adopting AI while identifying the skill set required for the future. He also noted that the firm needs to be ready for the future to remain relevant in today’s market. “We have invested a lot in associates in terms of how we can provide them with career growth and deployment opportunities,” he added.
During the April–June 2025 quarter, TCS hired 6,071 employees, bringing its total workforce to 613,069 as of June 30, 2025. On average, TCS’s headcount rose by 5,090 employees in the fiscal year’s first quarter. Its IT services attrition rate increased slightly to 13.8% in Q1 FY26, compared with 13.3% in the previous quarter.
India’s IT sector faces skill gap issues amid a drop in demand
The Indian IT sector has struggled in the last few months as a result of a drop in demand, increased inflation, and the uncertainty of US trade policy. Earlier this month, Krithivasan said they have been experiencing delays in client decisions and project kick-offs, which in turn have limited their growth.
In a report shared by the CEO of HFS Research, Phil Fersht, AI is changing the traditional people-heavy services model in the industry. He added that the model is forcing service providers the size of TCS to change their workforces to protect profit margins and keep up in a market where clients are asking for 20–30% off. Although it is expected to account for 7.5% of the GDP by 2023, IT has plenty of backing from the government with schemes like the 67 Software Technology Parks of India (STPIs), 100% FDI, and the National Policy of Software Products (NPSP).
However, attrition is still a major issue, with most companies having to look for more employees, which drives up recruitment costs by about 30%. Practices like subcontracting, workforce underutilization, and higher wage structures have also reduced profit margins for Indian IT firms. While some companies have tried to cut costs by reducing variable pay and hiring less experienced talent, sustained digital investments remain a marginal issue.
At the same time, the skill gap in new technologies is on the rise. For example, cloud computing needs 3.9 million professionals today, but the country reportedly has only 1.5 million. Likewise, cybersecurity has a deficit of about 700,000 professionals. Reports also claim Indian tech workers are not sufficiently prepared for some sophisticated positions. Only 51% of graduates are fit for core technology positions due to outdated curricula, inadequate practical experience, and an increased technological skills gap.
