The IT sector, which employs over 5.4 million people, has experienced layoffs and hiring freezes as companies increasingly automate routine tasks like coding and data entry with AI tools, reducing entry-level roles.

The increasing sophistication of AI is replacing foundational jobs traditionally filled by new entrants, with Indian firms hiring fewer than 5,000 in the June 2025 quarter—a 90% drop from 2021—prompting a reevaluation of talent pipelines.

The graduate unemployment rate in India exceeds 13%, nearly three times the national average, reflecting heightened job insecurity for new graduates amid automation-driven job reductions.

India's leading IT firms, including Tata Consultancy Services, Infosys, Wipro, and HCL Technologies, sharply cut fresh graduate hiring by 70% from 2023 to 2024, reflecting a major industry shift towards AI-driven automation.

This hiring decline, from 225,000 to just 60,000 new graduates, marks a 70% collapse in entry-level recruitment over the fiscal years, signaling significant changes in the sector.

Generative AI is estimated to automate 30-40% of tasks performed by junior developers and testers, further contributing to the decline in entry-level hiring.

Although AI and machine learning skills among graduates increased to 46% in 2024, overall employability has declined as companies favor experienced professionals capable of immediate AI integration.

Industry experts warn that without proactive reskilling and supportive policies, the shrinking number of entry-level jobs could lead to higher youth unemployment and threaten India's global tech standing.

The skills gap remains a critical issue, with fewer than 3% of engineers meeting industry needs in AI, underscoring the urgent need for educational reforms to better align skills with job market demands.

India’s workforce grows by 8-9 million annually, but the IT sector projects only about 50,000 net new jobs each year from 2026 to 2028, which is insufficient to absorb the expanding labor pool.

Despite a predicted 40% increase in fresher hiring by global capability centers in FY 2025, the sector’s contribution to GDP remains significant at 8%, yet failure to bridge the skills gap could hinder AI growth ambitions.

Some companies like Infosys plan to hire around 20,000 college graduates in 2025 and are focusing on AI reskilling, signaling a shift towards recruiting talent proficient in AI.