TCS is merely the latest in a line of IT firms succumbing to the pressures of technological advancements driven by artificial intelligence.

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A shadow was cast over the IT sector this past weekend, a shadow that falls across many segments of the economy. Tata Consultancy Services (TCS), India’s largest IT services exporter, has announced its decision to lay off 2% of its workforce, which equates to approximately 12,000 jobs. Here’s a deep dive into what it means for TCS.

But the implications of this move extend beyond TCS itself, particularly as many of those affected occupy middle to senior management roles.

TCS is merely the latest in a line of IT firms succumbing to the pressures of technological advancements driven by artificial intelligence. According to Layoffs.fyi, which tracks job losses in the tech sector, over 80,150 technology professionals across 169 different companies have been let go in 2025 alone.

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Earlier this year, Microsoft announced a staff reduction of 15,000 employees, representing around 7% of its workforce. In July, Intel joined the fray, reporting mass layoffs that will result in approximately 5,000 job eliminations in the US. The current wave of layoffs follows 150,000 job losses across 551 technology firms in 2024.

The influence of AI on employment is becoming increasingly evident, and regretfully, we may be witnessing only the beginning of a larger trend. Reports suggest that 92% of IT jobs will experience significant or moderate transformation due to AI advancements. The most pronounced changes will impact mid-level (40%) and entry-level (37%) technology positions.

Ford’s CEO, Jim Farley, predicts that AI could replace half of all white-collar jobs in the US. Similarly, Amazon’s CEO, Andy Jassy, acknowledged the inevitability of a smaller corporate workforce due to “once-in-a-lifetime” AI capabilities.

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The potential for job displacement is staggering; according to Goldman Sachs, AI could jeopardise 300 million jobs globally. While the impact varies regionally, automation and AI technologies are expected to displace 21% of jobs in Asia by 2026, with the manufacturing sector being the most vulnerable.

Jobs that involve repetitive tasks or simple data processing are particularly at risk, while positions requiring complex human interactions, creativity, and strategic thinking currently appear more secure. MIT research indicates that 2 million manufacturing jobs could be at risk by 2025, and as much as 30% of all jobs may be automatable by the mid-2030s. The finance sector, reliant on data-driven processes, faces similar threats, with many roles likely to be replaced by automation.

The consequences of these job cuts extend far beyond the IT sector. The layoffs of mid- and senior-grade employees, who represent significant consumers in the economy, could stifle spending and lead to a decrease in purchasing power. This fear-driven environment not only affects those who lose their jobs but also discourages remaining employees from making purchases due to concerns about their own job security.

The fallout from job losses in the IT sector has the potential to ripple through the broader economy. Declining consumer spending—an essential engine of economic growth—can lead to diminished demand for goods and services, resulting in further production cuts, additional layoffs, and eventual economic stagnation.

The repercussions could extend to significant sectors, including real estate, automotive sales, bank and NBFC lending, and even leisure spending, raising concerns about the impact on investment patterns. In tech hubs like Bengaluru, landlords are already reconsidering lease renewals for tech tenants, with many uncertain about extending agreements due to rising instability.

These job losses could also have long-term effects on innovation and venture capital investment, hindering economic growth and diminishing competitiveness for years to come.

Besides the impact on consumption, job losses can also impact investing. The first sign of a slowdown will be seen in the reduced inflows in systematic investment plans in mutual funds.

The domino effect of job cuts in high-paying middle and senior-level employees in the IT sector is a speed bump that can slow down economic growth.

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