India's IT Sector Faces a Transformative Phase

In a striking shift, India's $254-billion IT industry is moving away from traditional growth metrics tied to workforce size, as automation takes over low-to-medium complexity tasks. The December quarter witnessed a notable decrease in headcount among the top five IT firms, with a combined reduction of 2,587 employees. This marks a significant departure from the September quarter's addition of 15,033 employees.

While Infosys and HCLTech managed to add 7,725 employees, TCS, Wipro, and Tech Mahindra experienced a decline in their workforce. The trend continued into the March quarter of FY24, with a collective headcount decline of 12,600.

Future Outlook: A Leaner IT Industry

With the fiscal year FY25 nearing its end, industry experts predict that the IT sector will add less than a quarter of the employees it did in the previous fiscal year. Last year, the sector saw a net addition of 60,000 people, bringing the total to 5.4 million.

Peter Bendor-Samuel of the Everest Group highlights the industry's response to the COVID-19 pandemic, where companies stocked up on talent, leading to a reduction in hiring and reliance on attrition to rebalance talent stocks. HCLTech CEO C Vijayakumar notes that while revenue productivity has increased with a lower headcount, the demand for skilled professionals will continue to rise, pushing billing rates higher.