India's IT sector cuts 6% of staff as AI disrupts major employer

India's world-leading IT sector is undergoing a significant contraction driven by artificial intelligence automation. According to the Financial Times, several large employers have cut headcount by as much as 6% in 2026 alone. The human cost is captured in testimony from affected workers: one IT professional said, "The tool that we gave our sweat, blood and bones to — it threw us out," illustrating the perceived betrayal as AI systems replace the skilled labor that built the Indian IT industry. The market has reacted sharply: India's IT stock index has fallen 18% in 2026, signaling investor concerns about the sector's viability and growth prospects. The disruption carries broader implications for India's economy. The IT sector has been one of the key drivers of Indian economic growth and middle-class expansion since liberalization in the 1990s. Yet Prime Minister Narendra Modi has chosen to downplay job displacement concerns, suggesting the government is managing expectations rather than proposing direct interventions. Instead, New Delhi is pivoting its strategy. Recognizing that India lags in building frontier AI—the technology now disrupting its own IT sector—the government is shifting focus toward manufacturing consumer electronics as a new economic anchor. This represents a strategic retreat from software services toward hardware production, a shift that signals acceptance that the AI-driven transformation is irreversible. The upheaval is not confined to India. Japanese IT giant NEC is opening a new department staffed entirely by AI agents, demonstrating that the transition to AI-driven operations is a global phenomenon cutting across geographies and company sizes. For India, the challenge is acute: the sector that lifted hundreds of millions into the middle class is now shedding workers faster than it can retrain or redeploy them.