India tech pay drops 40% as AI reshapes offshoring markets
BENGALURU, INDIA — The once-booming Indian tech talent market is now facing a major recalibration, as median compensation for engineering and data roles drops by about 40% from last year, according to a new report from Deel and Carta.
As detailed in a report from CIO, the decline signals a shifting dynamic in global offshoring, where the traditional cost-driven model is being overtaken by rising demand for highly specialized AI and cybersecurity expertise.
India falls behind global tech hubs
The report shows that India now ranks at the bottom among 15 countries in median compensation for engineering and data roles, with pay averaging around US$22,000 in 2025.
This places India well below emerging tech hubs such as Brazil (US$67,000) and Mexico (US$48,000), and far behind mature markets like the United States, where median pay reaches $150,000.
Even as general engineering salaries fall in India, salaries for AI and machine learning roles are rising across regions — a clear sign that the global competition for advanced capabilities continues to stiffen.
The report notes an increased shift toward equity-based compensation in India, reflecting “equity-heavy compensation models” that help firms attract talent without increasing fixed salary expenses.
Industry analysts say these trends reflect deeper structural shifts in India’s tech economy. Faisal Kawoosa, founder and lead analyst at Techarc, pointed out that India’s IT model has historically leaned toward service delivery instead of innovation.
“India has become obsessed with services because they are easy to roll out, do not require deep R&D, and involve no IP,” he said, adding that this makes the local ecosystem “vulnerable” to shifts in global demand.
Workforce mix evolves as CIOs shift strategies
However, some analysts caution against interpreting the salary drop as a broad market decline. Sanchit Vir Gogia, chief analyst and CEO of Greyhound Research, emphasized that the fall reflects a workforce reshaping rather than mass pay cuts.
“The drop in median compensation is not due to widespread salary regression. It reflects the structural reshaping of India’s tech workforce,” he explained, pointing to the replacement of inflated remote roles with junior, locally compensated talent.
CIOs worldwide are now prioritizing AI-led delivery models, moving away from traditional large-scale outsourcing teams. As Kawoosa noted, “CIOs will now adopt an AI-first approach rather than just a digital-first approach for solving business problems.”
Outsourcing outlook remains strong but redefined
Despite the downward salary trend, India’s position in the global outsourcing industry remains resilient. The shift suggests a transition from volume-driven cost advantages to capability-driven delivery models.
Outsourcing providers that invest in AI engineering, platform automation, and product-based services are likely to benefit most. In other words, the offshoring narrative is not ending — it is evolving toward higher-value work where innovation and specialized technical skill, rather than headcount, define competitiveness.
