A scenario analysis by Citrini Research has raised fresh concerns about the long-term resilience of India’s export-driven IT services model, suggesting that accelerating adoption of artificial intelligence in software development could trigger contract cancellations at major outsourcing firms including TCS, Infosys and Wipro over the next few years. The findings, outlined in a thought exercise titled The 2028 Global Intelligence Crisis, frame AI not merely as a productivity tool but as a structural substitute for human coding labour.

India’s IT services sector exports more than $200 billion annually and remains the country’s largest contributor to its current account surplus, helping offset a chronic deficit in goods trade. For decades, the industry’s competitiveness has rested on labour arbitrage delivering software development, maintenance and consulting services at significantly lower cost than Western counterparts. This model enabled large-scale outsourcing contracts from global corporations, particularly in the United States and Europe.

According to the research scenario, that cost advantage is being eroded rapidly as AI-powered coding agents approach near-zero marginal cost, effectively limited to computing power and electricity. If enterprises can generate, test and deploy code internally using advanced AI systems, the need for large offshore development teams could decline sharply. In such a situation, contract renewals may weaken and cancellations could rise as companies reassess the economics of outsourcing.

The report positions India as structurally vulnerable in a world where value shifts from labour-intensive services to capital-intensive AI infrastructure. Economies investing heavily in data centres, semiconductor supply chains and AI platforms could benefit directly from the new technology cycle, while countries dependent on exporting human services may face pressure. In this framing, India becomes the “inverse beneficiary” of the AI boom exposed to disruption without fully capturing upstream gains.

A potential weakening in services exports carries macroeconomic implications beyond corporate earnings. The scenario links declining outsourcing demand to stress on India’s external accounts, arguing that reduced foreign currency inflows from IT services could narrow the current account surplus or even push it into deficit. In the extreme projection presented, the rupee depreciates sharply by as much as 18 percent within a few months prompting preliminary engagement with the International Monetary Fund by early 2028.

While the scenario is speculative rather than a forecast, it highlights a risk that investors have increasingly debated: whether generative AI will compress demand for traditional application development, testing and maintenance work the bread-and-butter of Indian IT firms. Over the past two years, global technology clients have already slowed discretionary spending amid macro uncertainty, and automation tools are being deployed to improve productivity internally.

For the industry, the central question is whether AI will reduce overall demand for outsourced services or merely transform the type of work required. Historically, technological shifts from mainframes to cloud computing have ultimately expanded the scope of IT spending rather than shrinking it. Indian firms themselves are investing heavily in AI capabilities, consulting services and platform integration to move up the value chain.

However, the transition may not be smooth. Large outsourcing contracts typically span multiple years, and renegotiation cycles could expose pricing pressure if clients believe automation lowers delivery costs. Margin compression, slower revenue growth and workforce restructuring are plausible near-term outcomes even if long-term demand remains intact.