The Union ministry of electronics and information technology is closely monitoring Tata Consultancy Services’ (TCS) decision to lay off over 12,000 employees, mostly at the middle and senior levels. Reports suggest the ministry has said it is in touch with TCS, trying to understand the underlying causes behind the move.

“Employment growth remains a key priority, with sharp focus on how initiatives like Employment Linked Incentive can help boost job creation,” a source was quoted as saying by PTI.

TCS on Sunday announced that it would lay off approximately 12,261 employees — 2 per cent of its global workforce — as part of its strategic plan to become a “future-ready organisation.” The company had 6,13,069 employees as of June 30, 2025, and had added 5,000 new staff during the April-June quarter.

“TCS is on a journey to become a future-ready organisation,” the company said in a statement. “This includes strategic initiatives on multiple fronts, including investing in new-tech areas, entering new markets, deploying AI at scale for our clients and ourselves, deepening our partnerships, creating next-gen infrastructure, and realigning our workforce model.”

“Towards this, a number of reskilling and redeployment initiatives have been underway. As part of this journey, we will also be releasing associates from the organisation whose deployment may not be feasible. This will impact about 2 per cent of our global workforce, primarily in the middle and the senior grades, over the course of the year,” the statement added.

However, TCS CEO and MD K Krithivasan clarified in an interview with Moneycontrol that the layoffs are not due to productivity gains from artificial intelligence (AI). “No, this is not because of AI giving some 20 per cent productivity gains. We are not doing that. This is driven by where there is a skill mismatch, or, where we think that we have not been able to deploy someone,” Krithivasan said.

“It is not because we need less people. We will continue to look for high (quality) talent, acquiring talent, training talent. That continues to happen. This is more about where there is a feasibility of deployment,” he added.

Krithivasan explained that while TCS has undertaken massive reskilling programs — training about 550,000 people in initial skills and 100,000 in advanced skills — deployment feasibility remains a concern. “So, some of them could be trained, but maybe we are not able to train beyond level 1 and level 2 skills, because when the person is a very senior person they may not be able to use the entry level skills,” he noted.

The layoffs, which will take place over the next three quarters of FY26, will not be limited by geography or domain. They are expected to affect middle and senior-level employees the most, alongside some entry-level associates who have remained on the bench for extended periods. This comes shortly after TCS revised its HR policy to mandate 225 days of billability per year and limited bench time to 35 days.

TCS has committed to providing support to those impacted, including notice period pay, severance packages, extended insurance benefits, counselling, and outplacement assistance.

The announcement had an immediate market impact. On Monday, TCS shares dropped nearly 2 per cent — falling 1.69 per cent to Rs 3,081.20 on the BSE and 1.7 per cent to Rs 3,081.60 on the NSE.

These developments unfold as Indian IT companies navigate macroeconomic headwinds, geopolitical uncertainties, and sluggish client spending. TCS reported a modest 1.3 per cent year-on-year revenue growth to Rs 63,437 crore in Q1FY26, with a 5.9 per cent rise in net profit to Rs 12,760 crore.

Krithivasan also acknowledged that the industry is facing a “demand contraction” due to persistent global challenges. “I do not see a double-digit revenue growth in FY26,” he said, adding that delays in client decision-making “have intensified” and discretionary spending remains subdued.

TCS’s layoffs mirror a broader trend in the tech industry. According to Layoffs.fyi, more than 80,000 tech workers have been laid off in 2025 across 169 companies. The previous year saw over 1.5 lakh job losses across 551 firms. These figures reflect not only economic pressures but also the disruptive evolution of roles due to technology.

Even tech giants are not immune. Microsoft, the world’s second most valuable public company after Nvidia, has cut more than 15,000 jobs this year — 7 per cent of its workforce. In a memo to over 2 lakh employees, Microsoft CEO Satya Nadella wrote, “This is the enigma of success in an industry that has no franchise value. Progress isn’t linear. It’s dynamic, sometimes dissonant, and always demanding. But it’s also a new opportunity for us to shape, lead through, and have greater impact than ever before.”