19/05/2026
TCS’s low salary hikes have been in the news, and a lot of people have been talking about them. The immediate explanations may be company-specific, including banding, reclassification, and a weaker-than-expected hike cycle. But the bigger reason this matters is that it may offer an early glimpse of a broader AI-related question for India.
What we may be seeing in IT today could, over time, start to be felt in other sectors too.
As AI and automation improve productivity, the key issue is not just whether companies become more efficient. It is **who captures the benefit**.
There are several ways this can play out:
- **Companies retain the gains** through better margins
- **Customers benefit** through lower prices and lower delivery costs
- **Employees benefit** if higher productivity supports better wages per worker
The more negative scenario is the one most often discussed: lower manpower needs, slower hiring, flatter wage growth, and eventually some pressure on household income and consumption. In a country like India, where the broader growth narrative is closely linked to jobs and income growth, that is a risk worth monitoring carefully.
But the positive counterargument is often forgotten.
If AI lowers IT and operating costs meaningfully, that can trigger a **strong demand response**. Lower costs can expand adoption, open up new use cases, and increase the scale of digital spending across industries. If demand rises enough, the result may not be lower employment and weaker wages. It could just as easily support **high employment and high wage growth**, even with better productivity.
So the real issue is not “AI is good” or “AI is bad”. It is whether demand expansion is strong enough to offset labour displacement, and how the productivity gains get distributed across profits, prices, and wages.
That is why employment trends, wage growth, and consumption need to be watched closely in the India story. And it is also why an increased international allocation can make sense for Indian investors: not because India’s long-term case is broken, but because this transition may create uncertainty in how growth is distributed across sectors, workers, and markets.
The important question is not just whether AI boosts productivity. It is whether that productivity translates into **jobs, incomes, and demand**.
