Budget 2026: IT/BPM wants clarity on labour codes, bigger push on AI, skilling

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• IT/BPM sector seeks clarity on labor codes to cut costs and boost profits
• Industry calls for Budget 2026 to boost AI, skills, and digital innovation
• Leaders urge fewer compliance hurdles, stronger infrastructure for global growth

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As India heads into Union Budget 2026, the Information Technology/Business Process Management (IT/BPM) industry is asking for a cleaner operating environment and sharper capability-building support that helps the sector scale artificial intelligence (AI) adoption, strengthen the talent pipeline, and keep India competitive in cross-border digital services.

The industry’s pitch is also more grounded than usual.

Alongside the big themes of AI and skilling, leaders are flagging friction points that show up directly in profitability and execution, from labour code ambiguity to compliance overlaps.

Labour codes: clarity is now a margin issue for IT services

One of the most immediate asks coming from IT services companies is clarity on labour codes, with executives signalling that uncertainty has cost implications.

In the just-concluded quarterly earnings (Q3 FY26) for major IT companies, India’s rollout of new labour codes pushed about Rs 5,000 crore of additional costs on the top IT firms, as revised wage definitions inflated gratuity and provident fund payouts.

Consequently, the impact will be felt across the coming quarters in the range of 15-20 basis points.

Mohit Joshi, CEO and MD of Tech Mahindra, told Moneycontrol that the labour code provisions can directly impact profitability, making clarity essential for the sector.

“For all the IT services companies, clearly, there was a significant provision that happened because of the labour code implications. I think it hits profitability. We're looking for a little bit more clarity on the labour code requirements. But otherwise, I feel the government has been very supportive of the industry,” Joshi said.

The comment highlights why labour code clarity has become a Budget season priority: it is not just a compliance matter, but a cost-and-planning issue for large services firms operating at scale.

Also, read: Labour Codes encourage hire-and-fire policy, 60-70% units now free to sack employees without govt nod

AI: The next phase needs adoption at scale, not pilots

Beyond operational clarity, the sector’s bigger push is for policy measures that accelerate AI-led transformation across IT and BPM delivery.

The argument is that AI, automation, and Generative AI are now central to raising productivity and service quality, and Budget 2026 is an opportunity to support that transition.

Venkatraman Narayanan, managing director of Happiest Minds Technologies, framed the expectations from an IT/BPM lens around scaling adoption and building resilience.

“From an IT/BPM perspective, the upcoming Union Budget is an opportunity to reinforce India’s leadership as a global digital and services hub. Policy measures that encourage adoption of AI, automation, and Generative AI across IT and BPM operations can significantly enhance productivity, efficiency, and service quality,” he further told Moneycontrol.

Skilling: focus on job readiness, transitions

The talent ask is emerging as the binding constraint for scaling the next wave of IT/BPM growth. While demand for digital services remains healthy, the workforce challenge is splitting into two tracks: improving entry-level readiness and enabling mid-career transitions into higher-value, tech-led roles.

Industry voices are pushing for practical, structured interventions that shorten the time new hires take to become fully productive, while also supporting reskilling at scale as delivery models evolve.

At the same time, as BPM operations become more technology-driven and outcome-oriented, leaders are stressing that skilling and reskilling must be treated as core enablers of productivity, rather than as side initiatives.

Also, read: Back office renaissance: Genpact, EXL, Firstsource surge as BPMs ride the AI wave, outpacing IT peers

Frontier tech, DPI expansion

The Budget expectations are expanding beyond enterprise adoption to ecosystem building. One priority being pushed is incentivising investments in frontier technologies such as AI, cloud, and cybersecurity, alongside targeted skilling initiatives to bridge the digital talent gap.

Nitin Chandalia, India leader for the Technology, Media and Telecommunications practice at BCG, said the sector would welcome measures that accelerate digital innovation while supporting high-value job creation. “From the Union Budget 2026, the IT and BPM industry would welcome measures that accelerate digital innovation while supporting the creation of high-value jobs,” he said.

Also, read: MeitY raises alarm over data breaches impacting trust in DPI initiatives

He also flagged a bigger platform-level opportunity for the government: expanding Digital Public Infrastructure beyond payments and identity.

“The government could also build on the success of Digital Public Infrastructure by expanding its application beyond payments and identity to sectors such as healthcare, logistics, and manufacturing, unlocking productivity and efficiency gains,” Chandalia said.

Also, read: India’s deep tech moment: 2025 marked the shift from promise to scale

IndiaAI Mission: the missing layer in enterprise adoption?

Beyond incentives for adoption, the industry is pointing to the need for deeper investments in AI infrastructure and access. Siddhartha Tipnis, partner and technology sector leader at Deloitte India, said sustained and scaled investment under the IndiaAI Mission, including sovereign and foundational AI models and democratised access to AI compute, can catalyse faster enterprise adoption.

He also linked this to services demand, saying this could expand demand for AI-led IT and BPM services.

Tipnis also flagged the need to operationalise the National Data Centre Policy, backed by long-term tax incentives and green energy-linked schemes, as part of strengthening India’s AI-ready digital infrastructure.

Also, read: Up to $100 billion investments may be announced at India AI Impact Summit

GCCs: Mid-career transitions now the real bottleneck?

A significant part of the Budget wishlist is coming from the GCC ecosystem, where the shift from scale-led growth to value-driven transformation is making talent availability a bigger strategic constraint.

Talent availability is emerging as the most critical strategic lever as GCCs move toward value-driven mandates, according to Kapil Joshi, CEO of IT staffing firm Quess Corp.

He urged the government to prioritise structured mid-career skilling and career-transition frameworks, with incentives for organisations investing in reskilling.

Also, read: Indian GCCs retrain staff as AI engineers to combat talent shortage

Apprenticeships, internships, job readiness

The workforce lens is also sharpening around entry-level readiness, with industry leaders pointing to the rising cost of training and the time it takes for new hires to become productive.

Achal Khanna, CEO of SHRM APAC & MENA, flagged the gap between academic learning and workplace requirements as an ongoing issue. He said Budget support for structured apprenticeships and industry-linked internships can help reduce the time-to-productivity and the training costs for companies, especially when hiring from smaller towns.

Stability matters more than sops, and Khanna also flagged delayed GST refunds, overlapping compliance requirements and ambiguity around tax treatment as issues that create avoidable friction, particularly for BPM companies serving international clients.

AI Industrialisation: Ready to move from PoC to scale?

In the tech-enabled BPM and customer experience segment, there is a sharper push to move beyond experimentation and into scaled deployment.

“AI is no longer experimental, it is now central to productivity, decision-making, and global competitiveness,” Akshay Chhabra, chairman and managing director of 1Point1 Solutions said, adding that Budget 2026 should help move the ecosystem from adoption to scale through a roadmap for AI industrialisation.

Also, read: Budget 2026: Software firms, cloud players seek AI industrialisation, push for sovereign infra

Experts argues that there is a need for stronger support for R&D, investment-linked incentives, policies that encourage private capital participation, and accelerated development of data centre infrastructure.

Exports, cross-border taxes, ESOP norms

Several voices are also anchoring Budget expectations in India’s export competitiveness, especially for services-led growth.

Rajesh Chhabra, general manager for India and South East Asia at Acronis, highlighted the sector’s macro importance, saying that services contribute nearly 50 percent of India’s exports.

Therefore, the Budget support should focus on augmenting digital and cloud infrastructure, encouraging research and innovation, and improving clarity on cross-border taxes and ESOP norms to attract high-skilled talent.

Fewer speed breakers, more scale levers

Across these asks, the throughline is consistent on the lines of removing execution friction and strengthening scale levers.

The industry’s message to the government ahead of Budget 2026 is clear: fix what slows companies down, and back what helps them scale.