For the last few months, a dramatic narrative has taken over social media: Artificial Intelligence will “kill” Indian IT.
The logic seems simple. If AI writes code in seconds, why would companies pay thousands of engineers to do the same job? If large language models reduce effort by 60%, won’t revenues collapse?
It sounds convincing. But it misunderstands both technology and economics.
Indian IT is not collapsing. What is collapsing is a 30-year-old operating model built on labour arbitrage. What we are witnessing is not death — it is decoupling.
And for sectors like textiles, manufacturing and MSMEs, this shift could be transformative.
THE END OF THE HEADCOUNT ECONOMY
For three decades, Indian IT scaled through what insiders called the “pyramid model.”
Revenue grew when headcount grew. Large firms hired tens of thousands of fresh graduates, billed clients for their time, and used the pyramid to protect margins.
That equation has broken. Top IT services firms are winning multi-billion-dollar deals while flattening workforce growth. The link between revenue and headcount has weakened dramatically.
This is not decline. It is productivity.
AI tools now automate large portions of repetitive coding, testing and documentation work. Clients know this. They are no longer willing to pay by the hour for tasks that AI can compress.
The result? A forced shift toward outcome-based pricing.
FROM BILLING HOURS TO BILLING OUTCOMES
The old contract model was “Time and Material.” Ten engineers working 1,000 hours meant 1,000 billable hours.
The new model is “Guaranteed Outcomes.” Clients want 99.9% uptime, automation targets, faster release and measurable ROI. If AI reduces effort, vendors keep the efficiency gains. If systems fail, vendors absorb the cost.
This transfers risk — but also opens margin expansion.
The industry is not shrinking. It is being disciplined.
THE MYTH OF INSTANT AI REPLACEMENT
There is another extreme narrative: that AI can simply replace legacy enterprise systems overnight.
That is fiction.
Large banks run on 30-to 40-year-old mainframes. Insurance companies sit on fragmented, inconsistent datasets. Manufacturing firms rely on undocumented workflows.
Most generative AI experiments stall at the Proof-of-Concept stage because enterprise data is messy, incomplete and highly sensitive.
This creates a new layer of value.
The demand is shifting from “code writers” to “code verifiers.” From software developers to AI architects. From operators to system designers who can integrate AI safely into complex environments.
India’s opportunity lies not in using AI — but in industrialising it responsibly.
THE NEW DEAL FLOW: WHAT IS ACTUALLY GROWING?
If maintenance contracts are slowing, where is the growth?
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Agentic AI and Digital Workers: Enterprises are deploying AI agents that autonomously resolve tickets, process claims and optimise workflows. The revenue model shifts from billing engineers to billing transactions.
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Engineering R&D (ER&D): Chip design, EV platforms, medical devices and embedded systems engineering are expanding. You cannot automate physics with a chatbot. Hardware-software integration remains human-intensive and high-value.
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Global Capability Centres (GCCs) 2.0: Multinationals are moving innovation mandates to India — not just back-office tasks. India is becoming a product ownership hub, not merely a delivery arm.
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AI Infrastructure: Secure models, private AI stacks and domain-specific models are becoming essential, especially for regulated sectors.
The transformation is structural, not cyclical.
THE BLIND SPOT: SMES AND TRADITIONAL SECTORS
While debates rage about Fortune 500 contracts, a much larger shift is unfolding quietly.
India has over 63 million MSMEs. For decades, most could not afford enterprise IT services. AI reduces deployment costs dramatically.
This is where the real blue ocean lies.
And this is where textiles must pay attention.
AI AND THE TEXTILE INDUSTRY: THE NEXT DISRUPTION
India’s textile sector — particularly clusters like Tiruppur, Coimbatore, Surat and Ludhiana — faces a parallel transformation.
The industry has historically competed on labour efficiency and scale. That advantage is narrowing as global buyers demand:
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Traceability: Compliance documentation.
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Sustainability reporting: Faster sampling cycles.
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Digital product passports: ingly require carbon reporting and supply chain traceability. AI systems can automate documentation workflows — a massive competitive edge for Indian exporters.
For a hub like Tiruppur, AI is not a threat — it is a survival lever.
THE KILL ZONE VS. KEEP ZONE IN IT AND TEXTILES
Every industry now has two zones:
The Kill Zone
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Manual repetitive coding
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Basic testing
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L1 IT support
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Manual data entry
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Manual fabric inspection without analytics
The Keep Zone
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AI architecture and governance
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Industry-specific AI platforms
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Secure sovereign AI models
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Smart manufacturing integration
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Sustainable supply-chain digitisation
In textiles, the factories that remain labour-only will face margin compression. The factories that embed AI into operations will expand margins.
THE LONG GAME: PLATFORMIZATION
The future of Indian IT is platformization.
Instead of building customised software from scratch for each client, companies are developing reusable AI-first platforms and licensing them.
The same model can apply to textiles.
Imagine:
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An AI-powered compliance platform for exporters.
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A shared demand forecasting engine for MSME clusters.
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A digital fabric marketplace powered by verified supply-chain data.
This is not fantasy. It is inevitable.
India’s IT sector is targeting a long-term expansion toward the $350–$500 billion mark by 2030. That growth will not come from hiring millions more freshers. It will come from productivity, platforms and deep domain expertise.
Textiles can either integrate into this ecosystem — or remain vulnerable to global disruption.
THE REAL VERDICT
Indian IT is not dying. It is shedding its labour-arbitrage skin and evolving into an intelligence-arbitrage industry.
Margins may compress in the short term as firms invest heavily in AI infrastructure and talent. But the long-term economics favour those who build platforms, not those who sell hours.
For India’s manufacturing and textile sectors, the message is clear: Do not fear AI. Industrialise it.
Because the next global export advantage will not be cheap labour.
It will be intelligent production. And India, if it moves decisively, can lead that transition.
Jaiprakash — Startup India Mentor; AIM India Mentor; Author & AI Researcher