Indian IT Sector Faces Turbulence Amid AI Disruption and Policy Uncertainty

Report by: Syed Taskin Ahmed

New Delhi, October 6, 2025 — India’s $250-billion IT industry, once the global symbol of outsourcing efficiency, is facing a period of slowdown as global clients delay contract renewals, reshapes roles, and U.S. visa policy changes threaten cost structures.automation

Contract Renewals Hit a Wall

According to reports from The Economic Times, several large Indian IT firms are witnessing delayed or stalled contract renewals. Clients across North America and Europe are re-evaluating their technology budgets amid macroeconomic uncertainty and the rapid adoption of AI-driven business models.

Where contract cycles once closed within 60 days, many are now extending to 90–150 days, affecting quarterly revenue visibility for giants like TCS, Infosys, and Wipro.

> “AI disruption has created both hesitation and opportunity,” said an industry insider. “Clients want to invest in transformation but are unsure which services will remain relevant in the AI era.”

AI and Automation Reshape Job Landscape

Artificial Intelligence is increasingly performing tasks once handled by mid-level engineers — such as software testing, maintenance, and data support. Analysts predict that up to 20–25% of low-skill IT roles could be automated within the next two years.

TCS has already reduced its workforce by roughly 12,000 employees (about 2%), primarily in middle management and legacy service areas.

Industry experts, however, believe the transition could lead to higher-value opportunities. “AI will displace some jobs but also create new roles in data engineering, cloud automation, and cybersecurity,” said a senior HR consultant.

Visa Policy Shock Adds to Woes

The U.S. government’s proposed H-1B visa fee hike to nearly $100,000 per application has sent shockwaves through the Indian IT community. While renewals remain unaffected for now, new applications could become prohibitively expensive for firms relying on onsite projects in the U.S.

NASSCOM, India’s IT industry association, has warned that this could cost Indian tech firms between $150–550 million in additional immigration expenses annually, pushing companies to adopt more offshore and nearshore delivery models.

Margins Under Pressure

The combined effect of delayed deals, higher visa fees, and increased competition has started to compress operating margins. To offset costs, companies are shifting work back to India or Southeast Asia and exploring automation-led efficiency programs.

> “The old outsourcing model is breaking down,” said technology analyst Ravi Mahajan. “The future lies in AI-driven managed services, not just manpower supply.”

The Road Ahead: Reskilling and Reinvention

As the industry navigates this transition, reskilling has become the new mantra. IT majors are investing heavily in training employees in generative AI, cloud computing, data science, and cybersecurity.

At the same time, firms are expanding into new markets beyond the U.S., targeting Europe, the Middle East, and emerging Asian economies to reduce dependency on North American clients.

Despite near-term headwinds, analysts remain cautiously optimistic. India’s vast talent pool and expanding AI infrastructure could position the country as a global innovation hub — if the sector can adapt quickly enough.

Headline: AI Disruption, US Visa Hike, and Slow Deals: Indian IT Faces Its Biggest Test in a Decade

Byline: Techtalk India | Hindi Tech Desk | October 6, 2025