TCS Implements Record Job Cuts as AI Transformation and US Relations Reshape India's IT Sector

Tata Consultancy Services Ltd. has implemented its largest workforce reduction ever as strained US relations and the AI revolution transform India's $280 billion IT services industry.

India's largest private employer eliminated 19,755 positions during the quarter ending September 30, according to their quarterly earnings report. This figure includes both terminated employees and voluntary departures.

The workforce at Asia's largest IT outsourcing company decreased by 3.2 percent from the previous quarter, falling below 600,000 employees for the first time since the fiscal year ending March 2022. The company allocated 11.35 billion rupees ($128 million) for severance-related expenses during this period.

According to Chief Human Resources Officer Sudeep Kunnumal, TCS is executing a planned workforce reduction primarily affecting middle and senior management due to "skill and capability mismatch." Speaking to analysts on Thursday, he revealed that the company has completed approximately half of its targeted 2 percent workforce reduction to be achieved by March next year, as the industry adapts to emerging technologies like generative AI.

Analysts at Citi noted that this substantial headcount reduction indicates a concerning business outlook. TCS's quarterly profit missed projections largely due to one-time costs associated with these job losses.

President Donald Trump's restrictions on H-1B visas and implementation of significant tariffs on India have created additional challenges for the country's technology firms as they navigate the transition to newer technologies.

While the direct impact of tariffs may be limited, reduced IT spending and increased geopolitical uncertainty will impact technology companies like TCS, which has been creating skilled employment opportunities for India, the world's most populous nation, since the 1990s.

TCS has substantially localized its US workforce to reduce dependency on H-1B visas. Kunnumal stated, "Our business model will be able to adapt quickly to any changes in immigration policy." The company will continue recruiting individuals with "future relevant skills."