With India’s tech sector on track to surpass $300 billion, what’s next for AI in the country? 

The first quarter of 2025 saw incredible growth from India’s tech sector. In fact, industry body Nasscom expects that revenue will cross $300 billion in fiscal year 2026.

Detailed further by Reuters, software services and software products are expected to add 126,000 jobs on a net basis, taking the total workforce to 5.8 million this year. For a country that in recent years became the most populous nation in the world, the tech sector’s ability to generate millions of jobs represents a critical growth lever. 

Agentic AI is largely seen as the next frontier. As it grows in maturity, it promises to reshape industry dynamics and business models. 

However, the rise of AI could also impact the country’ s IT services sector if not leveraged correctly.

India’s leaders in 2025 are taking a proactive approach to the rise of agentic AI and how it will impact software companies, offshore development centers and global capacity centers to prioritise workforce tech transformation, build digital trust, and foster resilience. 

Given how important the tech sector is for the nation’s economy and job market, it’s no surprise that the government is heavily involved at the intersection of technology, geopolitics, and trade demands. 

It’s also likely that India will strengthen its position on the global stage as it prepares to host the 2026 Global AI Summit. The next edition will see the nation bring heads of state, CEOs from small and large multinationals, academics, NGO representatives, and civil society members together for a series of global discussions on AI policy issues. 

At this pivotal moment for India’s tech sector and its approach to AI, veteran tech leaders are offering insights. 

Dr. Ranjit Tinaikar, was appointed CEO of Ness Digital Engineering in 2020 following more than 20 years of experience driving growth in the technology sector.

In a recent interview, Dr. Tinaikar gave detailed observations on the future of AI for India’s tech sector.

Solving India’s unique challenges with AI 

The Atlantic Council notes that the profound socioeconomic challenges that India’s 1.3 billion people face have fundamentally shaped its approach to AI. The idea of shining the spotlight internally to understand the most important AI use cases and where the biggest opportunities lie is one that Dr. Tinaikar touched on during the interview. 

Said Dr. Tinaikar: “What India has to do is really look at AI within the context of its own economic needs and not look to the United States for it.” 

“I think Geo in Telecom is a wonderful example of how they have taken this technology, telecoms technology and morph it for the Indian economy. Also, when I came to India, I remember people would say, I will give you a missed call. That’s the Indian consumer way of using technology. 

“People use WhatsApp, not text messaging. When I used to work at Reuters, India used to have three times more of the breaking news alerts than any other country, though, because that’s how we consume information.”

“So I think the entrepreneurs of India will be well-served, not looking to the United States for the next big use case. So I guess we have to look at solving very uniquely Indian problems.”

Regulating AI with industry insiders 

While every technology is subject to regulation, AI in particular has been hit with broad policies in some regions of the world. 

Said Dr. Tinaikar, “So, the European Union said we need to have a policy on AI. So, they got all the thought leaders, the professors, the bureaucrats and created a 3000-page compendium on data and other kinds of regulatory policies on the use and development of AI. 

“I personally believe such policies will bring the European economy to a grinding halt. I was in DC last week and I had the same question for an American policy maker. And they said we don’t want to do what you did.” 

Here, Dr. Tinaikar was keen to point out that the way that AI is applied is actually very nuanced and specific to the use case and industry it’s being developed to support. For this reason, the policies and regulations aren’t so much about the technology itself but how each industry is going to adopt the technology. 

“What we believe is that AI is a very domain specialized skills. AI is best controlled and managed by the various industries and sectors that use it. For example, we said, did you know that the Food and Drug Administration Authority of America has already approved hundreds of tools and techniques which use AI? Now, do you think a generic AI policy can control that? No. 

“The FDA understands the domain is best positioned to develop its own policy.” 

During the interview, Dr. Tinaikar also pointed out the importance of finding a way to build policies in a way that doesn’t stifle innovation and entrepreneurship. 

“When it creates policies, don’t create policies that will over-regulate entrepreneurship. Don’t create a regulatory authority that cuts across all sectors in a uniform way. Empower the various industries and sectors to regulate themselves with some high-level guardrails. Learn from some of these mistakes that others are making.”

AI’s disruption to the value of IT services 

As noted, AI is set to have a disruptive impact on how software service contracts and structures and the value they offer to end clients. For India’s huge IT service sector that includes offshore development centers, it’s critical to get ahead of the disruption. 

Ness found that AI wasn’t just changing the way that tasks were completed but actually disrupting the very structure of the team and the way that value and profit is derived from IT service models. 

Said Dr. Tinaikar, “We used AI-enabled software engineering tools to study the impact on productivity. And we came up with four results. The first result was that senior developers get more benefits from AI than junior developers. Both of them had productivity improvements, but senior people had more value from it.” 

“What does that do to the traditional IT services pyramid? The traditional IT services business model is based on a pyramid. You have very senior experienced people at the top and then you have a bunch of freshers who are trained and so actually most of the percentage gross profit that IT services makes is from the lower end of the pyramid.” 

“Now, if AI says that the senior engineers are still valuable, but the junior engineers, you will end up compressing. What happens to the pyramid of an IT services industry? What happens to its gross profits? It has fundamentally changed.”

Here, the rise of AI doesn’t mean that IT services aren’t valuable, but companies need to get ahead of how it’s changing the fundamental economics of the industry. 

“That doesn’t mean that you need less people in the pyramid because your demand increases, you’ll need more freshers. But the point is the structure of the pyramid changes. So that is one, it’ll completely change the economics. That’s one. The second is if you look at AI today, it’s still in its nascent state. So it works better with legacy code because it’s understood better. If you try to build a completely new application in a new domain with AI, it’s a little harder. So what that does is it reduces the total barrier to knowledge in writing code,” he concluded.  

Software engineers and India’s labor market 

For India, software engineers and IT services represent the backbone of the country’s tech sector and have played a huge role in increasing the overall GDP. 

Said Dr. Tinaikar, “I understand software engineering because that’s what Ness specializes in. We have 7.2 million software engineers, maybe more. Okay. That’s the number I have in my head. For the last 20 years, the growth of IT and IT-enabled services in India’s economy as a percentage of GDP has doubled.”

“What does that mean? IT services have grown faster than the rate of the economy. It used to be 6%, 25 years ago, today it’s 10%.” 

However, the strength of India’s deep tech talent pool isn’t just about the scale of numbers. As AI tools like CoPilot continue to develop, this is fundamentally changing the productivity of software engineers and how teams collaborate and operate. 

Dr. Tinaikar continued, “Not only is India growing, this is growing at double the rate of India. So that has been a fantastic growth story. It’s created jobs. It’s created, you know, after effects and things like that. Now, what AI does is fundamentally transforms the productivity of a software engineer. And scale is not an advantage alone. You need to completely re-skill your talent pool.” 

As India prepares to see phenomenal growth for its tech sector, getting ahead of AI’s role in the IT services industry will be key to the future, helping to unlock new opportunities and build agile teams.