India’s once-dominant IT services industry is facing renewed scrutiny as fears mount that rapid AI-led automation could fundamentally disrupt its business model, particularly for large service providers such as Tata Consultancy Services (TCS), Infosys and Wipro. A controversial report and recent market reactions suggest the sector may be entering an unprecedented phase of structural change and decline.
A thought-experiment style study released by Citrini Research, titled The 2028 Global Intelligence Crisis, has captured headlines by positing that AI automation could effectively collapse the traditional Indian IT export engine by 2028. The 2008-style scenario outlined by the report argues that AI coding agents will eventually be able to perform large portions of software development and maintenance work at a marginal cost close to “the cost of electricity,” eroding the cost advantage that Indian firms have historically offered to their Western clients.
Under this hypothetical scenario, key Indian IT corporations such as TCS, Infosys and Wipro could see widespread contract cancellations accelerate through 2027, undermining not only corporate revenues but also India’s external accounts, as these exports have traditionally played a vital role in supporting the country’s current-account balance. The report even suggests that the rupee could weaken sharply if services exports decline more steeply than expected.
The report has combined with broader investor unease to put pressure on stock valuations. The Nifty IT Index has plunged as much as 21 % in February 2026, marking its steepest monthly fall in over two decades, with Infosys down about 21 %, TCS down 19 % and Wipro down around 24 % this year. Analysts attribute the sell-off to fears that generative AI tools — which promise faster, cheaper coding and systems work — could undercut conventional outsourcing models that depend on large teams of human developers.
Adding to the concerns, global brokerage firms have downgraded major Indian IT names, warning that the traditional labor-arbitrage advantage may shrink significantly as clients increasingly experiment with AI tools. This has accelerated defensive sentiment in markets and eroded investor confidence.
However, experts also caution against interpreting such scenarios as inevitable. Industry groups like Nasscom continue to point out that the Indian technology sector remains robust and is expected to grow in revenue and employment by integrating AI-enabled services rather than being replaced by them outright. This view suggests that while AI may reshape business models, it could also unlock new opportunities in consulting, implementation and higher-value products rather than simply eliminating traditional work entirely.
In summary, while the AI doomsday narrative has triggered significant market stress and sparked debate over the future of outsourcing-driven growth, the long-term trajectory of India’s IT giants will likely hinge on their ability to adapt, pivot to new AI-driven offerings, and redefine value beyond low-cost labor. Investors, clients and policymakers alike will be watching closely as the sector navigates these unprecedented technological shifts.
