Tech lay offs’ cascading effect on india’s economy

Tech lay offs’ cascading effect on india’s economy

Any meltdown in the global tech industry will be fatal for the economy as tech professionals are driving the country’s home, car, and lifestyle markets with their fat pay-checks, caution experts.

About 90 out of 100 senior tech professionals earning between ₹45 lakh and ₹70 lakh per annum today carry “a solid fear of losing jobs on their faces,’’ observed an IT sector recruiter who had interviewed them for various positions in the last one month.

This fear seems to be spreading rapidly among techies. Following Microsoft’s lay-offs on May 13, Blind, which specialises in anonymous professional communities and workplace feedback, surveyed 3,543 U.S. professionals to gauge job insecurity across companies. Respondents were asked just one yes/no question: “Do you think you’ll lose your job in the next year?” Almost half, 47%, said “yes”.

‘Elephant in the room’

“The fear of getting laid off is the biggest elephant in the room for the majority of senior and super senior tech professionals in India today. Any mass firing announcements by bellwethers can instantly bring down the morale of the entire industry,’’ said B.S. Murthy, CEO Leadership Capital, a CXO hiring firm based in Bengaluru.

The context of this fear is clear. Multinational corporations have eliminated more than 1,05,000 positions worldwide this year. 20% of there were in India and some 45% of the lay-offs were in redundant positions in HR, support, content and coding, said Tholons in a study titled Layoffs Landscape. Tholons is a technology, innovation and investment firm with offices in Bengaluru and New York.

Major tech players including Meta, Amazon, and Indian start-ups have trimmed approximately 28,000 domestic positions since January 2025, while Microsoft laid off about 6,000 employees in its latest round of job cuts, affecting several divisions across the company and geographies, including India. This has led to panic right up to the top in the tech sector, according to industry observers.

“What began as post-pandemic corrections is now a permanent structural change catalysed by AI. A squeeze in the global tech market has drastically changed the economic realities for all,’’ said Avinash Vashishtha, former chairman and MD, Accenture (India) and executive chairman at Tholons.

Why the squeeze?

The reason is, Fortune 1000 global tech buyers have started decreasing their IT budgets and they won’t be spending anything more this year than what they spent last year for technology buying. “Large corporations are not spending any additional money this year, instead they want things to be done with fewer people and with less money,’’ said a CTO at an Indian tech firm not wanting to be identified.

According to him, the business outlook for technology in America is not looking good, leading to board members of large tech buying firms impressing upon their respective IT heads to cut budgets by 10-20%. This means bad news for tech providers the world over, including Indian systems integrators.

Under this changing market scenario, tech vendors, with a new mandate to offer additional value for less cost, are forced to innovate, and invest in AI-driven automation.

Since the advent of generative AI such as ChatGPT, things have changed drastically for the tech industry. And with the emergence of DeepSeek, with its large language model supporting technical reasoning, cost-effectiveness, and efficiency, many tech providers, including competitors like ChatGPT, are doubtful of their future in providing AI solutions.

Phil Fersht, CEO and Chief Analyst at London-based HFS Research said, a majority of global IT buyers prefer to approach niche specialist firms for their AI investments than traditional services firms.

“Many of the leading Indian firms lack depth of resources in specialist consulting and are too focused on lower cost delivery talent,’’ he opined.

According to Mr. Fersht, the impact of tariffs and ongoing uncertainty is also putting great strain on tech buyers.

Indian tech firms currently have excess staff in two categories: senior managers and managers. The ‘bulging middle’ typically refers to managers who are between senior leadership and front-line employees.

“When automation fully sets in, tech firms may eliminate a large number of people in these two senior layers,’’ Mr. Murthy predicted.

However, Kamal Karanth, co-founder, Xpheno, a specialist staffing firm argued despite sustained headwinds and adversities in the market, the last four fiscals had witnessed net headcount grow in the Indian tech sector.

Macro-economy effect

Indian tech sector, according to Nasscom estimates, contributed over $283 billion to India’s GDP in FY25. Of this an overwhelming $225 billion were in export earnings and another $58 billion in domestic business. Nasscom wagers that the sector is on a trajectory to reach the $300 billion mark in the current fiscal, with the industry expected to contribute $1 trillion to India’s GDP by 2030.

Industry watchers said any meltdown in the global tech industry could trigger more lay-offs, which could impact the Indian economy in multiple ways including a shrinkage in long-term asset creation, decline in car purchases, postponement of first/second home buying, trimming spends on expensive lifestyle products, refraining from foreign holidays and even shopping and eating out could be put on a “judicious mode’’.

“With chances of more lay-offs in the tech world, banks may not easily give loans. This scenario will impact home/apartment sales and car/high-end bike sales,” said a senior executive at a leading bank.