India’s top IT services firm, Tata Consultancy Services (TCS), said Sunday it will implement a 2% workforce reduction in fiscal year 2026, primarily targeting middle and upper management.
The company plans to slash roughly 12,200 jobs from its 613,000-plus employee base. However, it assured its clients that it would implement the changes cautiously to avoid any disruption in services.
TCS’s CEO says the company should be future-ready and agile
TCS is set to reduce its workforce while prioritizing AI, new market opportunities, and coping with unpredictable demand. According to CEO K. Krithivasan, the company has already started adopting AI, making operating model adjustments, and scaling AI deployment, while identifying the future skill sets required. He further noted that they must be future-ready and agile to remain relevant in today’s market.
He added, “We have invested a lot in associates in terms of how we can provide them with career growth and deployment opportunities.”
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 is dealing with a huge skill gap and weakened demand
India’s IT sector has struggled with sluggish demand, higher inflation, and uncertainty of US trade policy. Earlier this month, TCS CEO K. Krithivasan said they have been experiencing delays in client decisions and project kick-offs, which in turn have limited their growth.
According to Phil Fersht, CEO of IT consultancy HFS Research, AI is changing the traditional people-heavy services model in the industry. He said 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.
However, although it will 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 concern, with companies having to source more employees laterally, which drives up recruitment costs by 25% to 30%. Practices such as subcontracting, workforce underutilization, and higher wage structures further reduce profit margins for Indian IT firms. Even as some companies attempt to clamp down on costs by lowering variable pay and hiring less senior talent, sustained digital investments remain a margin drag.
At the same time, the skill gap in new technologies is growing. For example, cloud computing needs 3.9 million professionals today, but the nation reportedly has only 1.5 million. Likewise, cybersecurity has a deficit approaching 700,000 pros.
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.
