CNBC's Inside India newsletter: AI is taking over core operations of Indian IT companies.

The latest insights from a prominent newsletter highlight the significant transformation happening within India's IT sector, driven by the integration of artificial intelligence. As tech professionals navigate this rapidly evolving environment, the need to adapt and embrace AI has become crucial for career longevity. In a recent earnings call, Tata Consultancy Services (TCS), India's leading IT company, revealed a notable increase in its workforce skilled in advanced AI techniques, now numbering 217,000, up from 180,000 just a month prior. TCS is committed to equipping its entire staff with the tools to work effectively alongside AI, emphasizing the shift towards a collaborative working model. The trend is not isolated to TCS; more than one-third of Indian IT firms are now utilizing AI in up to 40% of their core business operations, according to a report from the National Association of Software and Services Companies (Nasscom) and job platform Indeed. Companies report a significant enhancement in key performance indicators, with improvements ranging from 25% to 35% attributed directly to AI integration. Predictions suggest that by 2027, nearly all work environments will feature teams composed of both humans and AI, with AI often taking the lead role. This shift poses a challenge: can the workforce keep pace with the rapid advancements in AI technology? Current research indicates that nearly one-quarter of entry-level positions now require skills related to AI or data, a sharp rise from the 5% to 10% range just three years ago. The Indian government's policy think tank, Niti Aayog, has raised alarms about a widening skills gap in the AI domain, projecting that talent supply will only meet 50% of the current demand. Moreover, without proactive measures to enhance AI skills, the tech services sector could see a reduction in workforce size from 7.5-8 million in 2023 to about 6 million by 2031. However, with strategic upskilling initiatives, this number could rebound to 10 million. Despite current reductions in workforce numbers, TCS reported a total of 582,163 employees as of December, down from 607,979 earlier in the year, attributing some layoffs to skill mismatches in light of AI advancements. Market analysts anticipate a gradual recovery in hiring, projecting an increase in net hiring rates as AI becomes a central driver of demand across various businesses. However, opinions on the future of IT employment vary. Some industry experts warn that the demand for human labor in IT will drastically decrease as AI technologies advance, suggesting that the IT sector may soon require significantly fewer human resources than currently employed. As companies continue to adapt and incorporate AI into their operations, the onus will be on the workforce to acquire new skills and evolve with the technology. Observers note that while the road ahead may be challenging, those who embrace the partnership with AI may find new opportunities in this dynamic landscape.