AI threatens the arbitrage that built India's IT industry (opens the source in a new tab)
- David Oks traces how IBM's 1978 exit, undersea cables, the 1991 reforms and Y2K made India "the world's back office". IT is about 7% of GDP and a quarter of exports, and services earn a surplus of about $190 billion.
- Revenue has not collapsed: margins are up and TCS reports $2.3 billion of AI revenue. But hiring has fallen hard, and TCS, Infosys and Cognizant have each lost about 30% of market value in 2026.
- His worry: if AI does the work of fifty engineers with ten, exports shrink while India imports AI, and the spending that IT salaries support weakens.
- ~7%
- of India's GDP from IT
- $190bn
- services trade surplus, FY25
- ~30%
- value lost by TCS and peers in 2026
Why it matters IT employs few but matters hugely: it pays for India's goods deficit and supports a wide web of spending. Roubini's 9% assumes services keep pulling; this essay asks what happens if they stop.
Other side The firms are being hired to put AI into clients' systems, and margins are rising. If they move up to higher-value work, the labour model can shrink without the industry shrinking.
Source:Asterisk (free to read) ↗