AI automation shift: Hiring becomes more selective

NRI Biz Matters

Question: There have been recent reports in the Indian press that companies in the IT sector have laid off employees during the last month.  What is the reason for this downturn and are there any prospects of its reversal?

ANSWER: You are right in pointing out that in the last few weeks some of the top IT companies in India have reduced their workforce, mainly mid-level employees. The industry is undergoing a structural shift in line with global trends where major tech firms are streamlining resources, reallocating assets, and shutting down divisions that no longer align with strategic priorities. Many experts believe that AI is disrupting the traditional workforce pyramid and replacing broad-based hiring models with leaner, more specialised structures which would yield higher revenues.  In short, the shift is driven by the widespread adoption of AI, automation and cloud-based architectures.

However, the silver lining is that robust outsourcing demand from Europe in recent months has helped IT companies to maintain revenue growth.  Europe has started to build capabilities to sustain its tech sovereignty which at the moment is heavily dependent on the United States. The United Kingdom, Ireland and the Benelux countries are enhancing their capabilities in generative AI, cloud, digital and cyber security.  Europe comprises around 25 to 30 per cent of the global market for India’s top tier IT companies, while the United States is at 40 to 50 per cent. With AI-driven automation reshaping business models, companies are prioritising digital transformation and employee upskilling. Hiring has become more selective and aligned with core business objectives.

Question: The US administration has imposed tariffs of 25% on Indian goods exported to America. Will this have a significant impact on the Indian manufacturing sector?

ANSWER: The textile, gems and jewellery sectors will be adversely impacted by the 25 per cent tariff. However, India is in the process of negotiating a Bilateral Trade Agreement with the United States. Once this is signed and comes into effect, the provisions and tariff rates as prescribed in the agreement will prevail. .  Pharmaceutical products will continue to be exported from India as they have been widely used in the American medicare system and such products are not readily available in large quantities from other countries at the same competitive rates at which Indian companies supply.

Question: Have provisions been made for preserving the confidential data of taxpayers in the new income tax law which is to be passed shortly?  Is there any difference between the existing law and the new one?

ANSWER: The new income tax law has not given any additional powers to officers of the tax department which will continue to work on the philosophy of ‘trust first and scrutinise later’.  The government has directed tax officials to work on the presumption that taxpayers declare their income honestly.  Steps for search and seizure and scrutiny of assessments are taken only where there is credible evidence of large scale tax evasion, concealment of income or involvement in illegal activities. The new tax law has made provisions for maintaining confidentiality of taxpayer data and has put in place internal controls to safeguard its integrity.

The faceless nature of procedures like assessments and appeals introduces a layer of anonymity by design. This ensures a neutral, fair and objective approach. Risk assessment uses identity-blind and rule-based algorithms. Powers to access digital devices during search and survey operations have been updated in conformity with the needs of the digital age.  In course of time, AI will play a critical role in detecting and curbing shell companies, unaccounted money and illegal transactions.  Thus, AI will be used primarily for fraud and anomaly detection, pattern recognition, trend identification, predictive modelling and processing of unstructured data.

The writer is a practising lawyer, specialising in corporate and fiscal laws of India.