This article was originally published in Rest of World, which covers technology’s impact outside the West.

On February 4, the $300 billion Indian IT sector faced a moment of reckoning.

The country’s benchmark IT stocks index slumped nearly 6%, reacting to Anthropic’s release of its Claude Cowork agentic plugin.

The new plugins are designed to automate precisely the high-volume, repetitive knowledge work that has been the bread and butter of Indian IT: contract reviews, regulatory compliance tracking, and sales forecasting, among other things. The stock sell-off was triggered by fears that clients could now use AI for such tasks instead of outsourcing them to companies in India.

This was the first concrete sign of AI’s long-feared threat to the industry, which makes for 10% of India’s GDP and directly employs 5 million people.

Indian IT firms have been preparing for this eventuality. Still, experts who have observed the industry closely believe many of these companies and their services will soon become obsolete. AI won’t kill the entire sector, they said, but only the companies that innovate and adapt to AI quickly will thrive in the future.

“The math is simple: If a U. company can automate legal contract reviews internally using Claude Cowork or OpenAI Codex, why would they pay for a 50-person team in Bengaluru...

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