Data for the coming fiscal year signals that startups are hiring again — albeit with caution. After navigating brutal layoffs, cost-cutting, and investor hesitance, Indian startups and technology firms appear ready to step tentatively back onto the hiring path. According to projections by industry researchers and employment tracking firms, FY26 could witness as many as 80,000 net new tech jobs, pointing towards a recovery that, while not euphoric, offers hope for thousands of skilled professionals eager to get back into the market.
Yet, lurking beneath the surface are nuanced realities — from the impact of artificial intelligence (AI) on job profiles to cautious financial planning that still governs startup boardrooms. This is not a return to the hyper-hiring frenzy of 2021. Instead, it’s a story of selective, strategic expansion shaped by evolving business models, technological shifts, and cautious investor sentiment.
Startups Shift Gears: From Layoffs to Recovery
It wasn’t long ago that India’s startup ecosystem was reeling under news of mass layoffs and shrinking funding pools. FY24, in particular, turned into a period of intense consolidation. Once-flush startups, which had raised billions during the pandemic-era funding boom, found themselves struggling with high burn rates and dwindling venture capital pipelines.
The result? Sweeping job cuts, especially in the latter half of FY23 and throughout FY24. According to multiple industry estimates, net new additions dropped sharply in FY24, falling back to levels last seen during the pandemic.
But that cycle, it appears, is finally showing signs of reversal. As reported by workforce research firm Xpheno, Indian startups added around 60,000 net new employees during FY25. This figure, while not matching the dizzying highs of earlier years, marks a meaningful rebound from the low tide of FY24. The total startup workforce has now climbed to roughly 5.9 lakh employees, signaling renewed, if cautious, confidence in the sector’s growth trajectory.
The Numbers Behind the Comeback
The job market’s rebound in FY25 and outlook for FY26 stems from both new hiring and backfilling roles lost to attrition. According to Xpheno’s data, around 1.6 lakh individuals were hired during FY25. This figure includes net new additions as well as replacements for approximately one lakh positions vacated due to turnover.
While the numbers remain below the record pace of FY23, which saw roughly 1.8 lakh net additions, the upward trend is notable. Even at a measured pace, startups seem ready to expand teams again rather than merely sustaining current staff levels.
Looking ahead, Xpheno forecasts that the tech sector may inch closer to its pre-downturn highs in FY26, with 80,000 net additions anticipated. If achieved, this would expand the overall tech workforce from 5.9 lakh at the end of FY25 to 6.7 lakh by March 2026.
What’s Driving This Renewed Hiring Momentum?
Several forces are converging to fuel this cautious optimism in the startup employment landscape:
1. Funding Winter Eases… A Little
While funding volumes have not returned to the stratospheric levels of 2021, the worst of the funding freeze appears to be over. Deal volumes and ticket sizes have stabilized somewhat, allowing many startups to shore up finances and plan modest expansions.
2. Sectoral Bright Spots
Certain sectors remain magnets for both investor interest and consumer demand. Quick commerce, eRetail, marketplaces, fintech, and F&B retail continue to attract capital and talent, even amid broader caution.
Prasadh MS, Head of Workforce Research at Xpheno, told the Economic Times:
“With GCCs (Global Capability Centers) potentially in the lead, followed by a recovering IT services sector and the startups sector, the fiscal ahead will see higher talent action than FY25.”
These sectors, he noted, are driving net headcount growth through innovations in logistics, digital payments, and consumer engagement.
3. AI-Driven Growth
The buzz around AI is undeniably reshaping how startups plan for the future. While the impact of AI on job replacement has yet to fully materialize in India’s startup ecosystem, it is already creating new roles in product development, engineering, and data science.
The TeamLease Employment Outlook Report reflects this transition, stating that nearly 69% of employers in the startup and tech segment plan to expand their workforce in the first half of FY26. This growth is driven by advancements in:
- AI-driven product scaling
- Cloud-native engineering
- Growth marketing
Startups Still Treading Carefully
Despite green shoots, Indian startups remain wary of overextending themselves. The same TeamLease report reveals a net employment change (NEC) of +6.9% for the first half of FY26, a slight dip from +8.9% in the second half of FY24-25. While a positive NEC indicates more hiring than layoffs, the decline signals tempered enthusiasm.
About 12% of employers still anticipate reducing headcounts, citing cost discipline and the need for leaner operations. Meanwhile, 19% foresee no changes to their workforce levels in the near term.
Prasadh MS observed that AI adoption has yet to trigger widespread job cuts:
“The mainstream application of AI in enterprises is largely at the lower spectrum of rule-based activities and low complexity roles and functions. Startups haven’t begun the replacement of roles with AI at the low spectrum roles, though the potential to do so is high.”
In other words, while AI might eventually reshape staffing structures, for now, human talent remains indispensable across critical functions.
In-Demand Roles: Who’s Hiring and for What?
So where exactly are startups focusing their hiring efforts as they cautiously rebuild teams?
According to both TeamLease and Xpheno, several roles have emerged as high-demand targets:
- DevOps Engineers: As startups push toward rapid software deployment and infrastructure scalability, DevOps talent is crucial.
- Product Managers: With intense competition in digital products, startups are investing in leaders who can drive user experience, roadmap planning, and monetization strategies.
- Full-Stack Developers: Companies continue to favor professionals who can straddle both frontend and backend development, especially in B2C, D2C, and platform-first startups.
- Cloud Engineers: The shift to cloud-native solutions has become a necessity rather than an option, leading to sustained demand for cloud architects and engineers.
Even as new technologies evolve, core software engineering roles remain resilient pillars of the tech hiring market.
AI’s Double-Edged Sword
Artificial intelligence is simultaneously the biggest growth driver and the largest question mark for the future of tech hiring.
On one hand, AI is fueling demand for specialists who can design, train, and deploy complex models. Roles in machine learning engineering, natural language processing (NLP), and AI product management are seeing robust interest.
On the other hand, the very same technology has the potential to eliminate thousands of jobs, particularly in routine and rule-based functions. While India’s startups have not yet aggressively implemented AI-based layoffs, analysts caution that AI’s disruptive impact is inevitable.
Prasadh MS explained:
“Startups haven’t begun the replacement of roles with AI at the low spectrum roles, though the potential to do so is high.”
For now, AI remains an enabler rather than a destroyer of jobs in the startup ecosystem — but that balance could change quickly as tools become more capable and affordable.
Five-Year Retrospective: From Boom to Winter and Back Again
The hiring story in India’s startup sector over the past five years reads like a roller-coaster ride:
- FY21: Startups hired cautiously due to pandemic uncertainty, adding only 50,000 net new employees.
- FY22: A massive rebound saw 2.1 lakh net new additions, translating to nearly 800-900 hires per working day driven by hyper-growth in tech.
- FY23: Began strong but slowed sharply in the second half as funding dried up.
- FY24: Became a high-impact year of layoffs and consolidation, with net hiring levels dropping back to pandemic-era lows.
- FY25: Showed early signs of stabilization, with 60,000 net additions.
Cumulatively, the tech startup cohort in India expanded from 2.5 lakh white-collar professionals in FY21 to approximately 3.6 lakh by FY25, according to Xpheno. Over five years, the sector registered a gross hiring count of 7.1 lakh people, a testament to its resilience despite external shocks.
Cautious Optimism for FY26 and Beyond
Looking ahead, the key question is whether the recovery seen in FY25 can transform into sustained momentum through FY26.
Signs are promising but measured:
- Funding flows are returning to healthy levels, though not at 2021’s exuberance.
- Startups are adopting cost discipline, focusing on sustainable business models rather than growth at any cost.
- Technology trends like AI and cloud computing are creating new opportunities, even as they threaten existing job profiles.
Startups are not racing ahead with unchecked hiring sprees. Instead, they’re strategically expanding in high-impact roles and sectors. That’s good news for the health of the ecosystem, suggesting that the mistakes of hyper-growth periods might not be repeated so easily.
What It Means for Job Seekers
For India’s massive pool of tech professionals, the cautious rebound means:
- Opportunities are returning but competition remains high.
- Professionals with cross-functional skills — combining tech expertise with business acumen — are particularly well-positioned.
- Roles in AI, cloud, and product management will likely see strong demand.
- Adaptability will be crucial, as technology continues to evolve faster than ever.
While job seekers can breathe a tentative sigh of relief, they’d do well to stay sharp and continuously upskill for the new technologies reshaping the industry.
Conclusion: A Sector Rebuilding with Eyes Wide Open
India’s startup ecosystem is stepping out of the shadows of a difficult few years. The cautious hiring optimism seen in FY26 projections reflects a sector that has learned from past excesses. Instead of hyper-growth, startups are aiming for sustainability, strategic talent acquisition, and technological evolution.
The road to recovery won’t be linear. Economic uncertainties remain. The specter of AI-driven job displacement still hangs in the background. Yet, the fundamental belief that innovation drives opportunity remains undiminished.
As FY26 unfolds, the question is no longer whether India’s startups will grow — but how wisely they’ll manage that growth. For the millions of professionals whose livelihoods depend on this vibrant sector, cautious optimism may be the perfect sentiment for the times.
