India's Tech Pay Plummets 40%: Is This the End of Offshoring as We Know It?

India's Tech Talent Market Cools Rapidly

India's once red-hot tech talent market may be cooling fast, suggesting a change that CIOs cannot ignore. The median total compensation for engineering and data roles has fallen to about $22,000 in 2025, roughly 40% lower than last year, according to a report from Deel and Carta.

While salaries continue to rise in the US, Canada, and Europe, the sharp decline in India marks a turning point in the economics of offshoring and raises new questions for CIOs about cost, capability, and the long-term stability of the country's IT labor pool.

India Ranks Last in Global Tech Compensation

According to the report, India now ranks at the bottom among 15 countries in median compensation for engineering and data roles.

The US leads with $150,000, followed by Canada at $121,000 and the UK at $117,000. Emerging markets such as Brazil and Mexico, with median pay of $67,000 and $48,000, respectively, also outpace India.

The report also noted that total compensation for AI and machine learning engineers is rising sharply across all markets, highlighting growing global competition for advanced technical skills even as pay for broader engineering roles declines in India.

The divergence indicates that as global demand concentrates on high-value AI and cybersecurity roles, demand for general engineering positions, a category that has historically underpinned India's tech industry, may be coming under pressure.

Widening Pay Gap and Shift to Equity-Based Compensation

The data suggests that India's pay gap with other tech markets is widening as global demand for traditional offshore roles tapers off.

Equity-based pay is becoming more common in India as well, as employers try to offset lower base salaries. Equity grants as a share of company ownership have increased steadily between 2021 and 2025, mirroring trends in Brazil.

This reflects a shift toward "equity-heavy compensation models" in emerging markets, allowing firms to attract and retain skilled talent without significantly raising fixed payroll costs.

Why This May Have Happened

Analysts say the decline reflects a deeper structural change in the global tech economy. The appetite for labor arbitrage is dying slowly, said Faisal Kawoosa, founder and lead analyst at Techarc.

"India has become obsessed with services because they are easy to roll out, do not require deep R&D, and involve no IP, only processes that can always be replicated and improved," Kawoosa said. "Indian IT services companies have developed wizards to aid their service delivery but have rarely attempted to build products. This makes our ecosystem vulnerable, and the risk of 'portability of opportunity' always exists."

However, others cautioned that it is important to separate the mathematical signal from market reality.

"A median is not an average – it simply represents the midpoint in a dataset and is highly sensitive to distributional changes, especially when the mix of seniority, contract type, or geography shifts," said Sanchit Vir Gogia, chief analyst, founder, and CEO of Greyhound Research. "The drop in median compensation is not due to widespread salary regression. It reflects the structural reshaping of India's tech workforce, particularly the replacement of inflated USD-denominated remote roles with junior, locally compensated engineers."

Gogia said the workforce mix is shifting geographically too, with Global Capability Centers (GCCs) and product teams expanding to Tier-2 cities and beyond, where salaries, though lower than Tier-1 hubs, have risen 15%–25% year over year.

Implications for CIOs

The report recommends that enterprises broaden their hiring footprint beyond traditional offshore hubs, highlighting the growing contractor-based talent pools in Argentina, Mexico, and Brazil, where 80% to 90% of tech workers are engaged as independent contractors.

By comparison, markets such as the US and Germany remain dominated by full-time employees, though contractor hiring is rising in places like the Netherlands, Spain, the UK, and Canada.

The shift reflects how remote work and new visa programs are enabling companies to distribute work across multiple regions, reducing their reliance on any single geography.

"CIOs will now adopt an AI-first approach rather than just a digital-first approach for solving business problems," Kawoosa said. "We have moved beyond bringing businesses online. The focus is now on using AI to drive efficiency, not just people or process automation."

Gogia said that CIOs across BFSI, telecom, manufacturing, and healthcare show a decisive move away from cost-first bench models. "Instead, enterprises are favoring smaller, product-linked pods with full-stack capability and embedded platform intelligence," he added. "These teams are expected to work in hybrid architectures, reduce deployment risk, and accelerate delivery of AI-enabled digital services." These shifts suggest that India's role in global delivery may continue to remain strong but is being redefined around capability, automation readiness, and product-driven outcomes rather than traditional cost advantages.