The Silent Fallout: Mental Health Implications of AI-Driven Layoffs in India’s Tech Industry

Introduction

Artificial Intelligence (AI) is reshaping industries worldwide, and India’s technology sector sits at the epicenter of this transformation. While AI promises efficiency, innovation, and productivity, it has also triggered an unsettling wave of layoffs. Thousands of Indian IT professionals—from entry-level coders to experienced project managers—have found themselves displaced by automation and machine learning tools that can execute tasks faster and cheaper.

Beyond financial strain, these layoffs carry a profound psychological toll. Job loss is consistently ranked as one of the most stressful life events (Holmes & Rahe, 1967), and in India’s high-pressure tech ecosystem, the ripple effects extend to self-worth, family stability, and community well-being. This article explores these impacts, introduces the concept of “quiet cracking,” and highlights strategies for resilience at the individual, organizational, and policy levels.

Quiet Cracking: The Invisible Mental Health Toll of AI-Driven Layoffs

In workplaces increasingly reshaped by AI and automation, the fallout of layoffs isn’t always loud burnout or dramatic exits. Instead, many employees experience what researchers call “quiet cracking”—a subtle yet corrosive weakening of morale, identity, and mental resilience.

Unlike “quiet quitting,” where workers reduce effort deliberately, quiet cracking describes a stealthy disengagement fueled by economic insecurity, fear of AI automation, and a lack of recognition. Employees remain in their roles physically, but mentally they feel disconnected and demoralized.

A TalentLMS survey found that 20% of U.S. workers experience quiet cracking frequently, and another 34% occasionally. While Indian-specific data is emerging, anecdotal accounts suggest the phenomenon is widespread in IT hubs such as Bengaluru, Hyderabad, and Pune, where AI-related layoffs are most pronounced.

The Mental Health Fallout of AI-Driven Layoff Anxiety

Technostress, Anxiety & Depression

A 2025 Romanian study using structural equation modeling found that AI-induced technostress significantly predicts symptoms of anxiety (β = 0.342, R² = 11.7%) and depression (β = 0.308, R² = 9.5%) (Lițan, 2025). This underscores that rapid AI integration isn’t just a technological shift—it’s a psychological one.

Widespread AI-Related Worry

The American Psychological Association (2023) reported that 38% of workers experience AI-related job insecurity affecting their mental health, with one-third rating their overall well-being below par. Media reports from India echo similar fears, with IT professionals describing sleeplessness, irritability, and hypervigilance over performance monitoring by AI-driven systems.

Personal Narratives of Quiet Cracking

Interviews compiled by Business Insider describe workers facing fatigue, panic attacks, stress eating, and emotional detachment. These are quiet but cumulative symptoms that slowly erode well-being—even as employees outwardly appear functional.

Economic & Organizational Impact

The Economic Times reports that disengagement linked to quiet cracking has cost the global economy $438 billion annually, largely due to hidden productivity losses. For India, a country banking heavily on IT services exports, this translates to not only an organizational challenge but also a macroeconomic risk.

Broader Psychological Impacts of AI Layoff Anxiety

• Eroded Sense of Identity: In India, where work often defines self-worth, job insecurity erodes the very foundation of identity.
  
• Chronic Existential Anxiety: Automation forces employees to question their value beyond productivity, intensifying long-term unease.
  
• Global Mental Health Shockwaves: High-profile layoffs at tech giants spark ripple effects, generating survivor guilt and fear among those still employed (The Guardian; The Economic Times).
  

The Scale of the AI Layoff Wave in India

India is home to over 5 million IT professionals (NASSCOM, 2023). With AI-driven automation spreading across customer support, software testing, and data analytics, reports suggest nearly 30% of IT roles could be disrupted within the next five years (McKinsey, 2023).

In 2024, several Indian IT firms and multinational corporations downsized teams, citing efficiency and cost competitiveness. The hardest hit were mid-career professionals balancing loans, children’s education, and family responsibilities. For this group, job loss translated directly into psychological crises.

Cultural Context: Why the Impact is Stronger in India

• Social Identity Through Work: For urban middle-class families, success in IT is not just employment but status. Losing it often feels like social failure.
  
• Stigma Around Mental Health: Despite progress, therapy is often seen as a weakness. Many laid-off employees delay seeking support.
  
• Family & Financial Dependencies: Unlike in the West, Indian professionals often support extended families, magnifying financial and emotional strain.
  
• Competitive Job Market: With thousands of skilled graduates entering the workforce annually, displaced employees face daunting re-entry barriers.
  

Strategies to Rebuild Inner Resilience

These interventions offer a path from silent fracture to secure grounding.

Organizational and Policy-Level Interventions

While individuals must build resilience, systemic changes are equally crucial.

For Organizations

• Transparent Communication: Honest disclosure about AI integration reduces mistrust.
  
• Mental Health Support: Counseling, Employee Assistance Programs (EAPs), and career transition resources can buffer distress.
  
• Ethical Restructuring: Adequate notice, severance pay, and reskilling opportunities ensure layoffs are handled with dignity.

For Policymakers

• Safety Nets: Strengthen unemployment insurance, retraining subsidies, and access to mental health care.
  
• Reskilling Initiatives: Public-private partnerships must anticipate AI-driven labor shifts.
  
• Awareness Campaigns: Normalize therapy and reduce stigma through national outreach.

The Role of Therapy in Rebuilding Identity

Therapy helps individuals reframe layoffs not as personal failure but as systemic change. Cognitive Behavioral Therapy (CBT) reduces catastrophic thinking, while mindfulness and somatic practices regulate stress. Group therapy fosters solidarity, reminding employees they are not alone.

Crucially, therapy supports a redefinition of identity beyond work—focusing on intrinsic values, family, and self-growth. In India’s achievement-oriented culture, this reframing is vital to long-term resilience.

FAQs

1. Why are AI layoffs impacting mental health so severely in India?
Because professional success in tech is tied to identity, financial stability, and family responsibilities—making unemployment especially destabilizing.

2. Can reskilling reduce anxiety?
Yes. While it doesn’t remove uncertainty, reskilling restores a sense of agency, protecting against depression.

3. What role should companies play?
They must communicate openly, provide severance, and offer mental health and career transition support.

4. How can families help?
By avoiding blame, validating emotions, and creating supportive daily routines that reduce isolation.

5. Which therapies are most effective?
CBT for anxious thoughts, somatic practices for stress regulation, and group therapy for collective healing.

Conclusion

The AI-driven layoff wave is more than an economic adjustment—it is a mental health challenge rippling across India’s tech corridors. Addressing it requires a collective effort: individuals caring for their mental well-being, organizations restructuring with empathy, and policymakers building stronger safety nets.

Above all, India must reframe mental health as a shared responsibility. As AI reshapes the workforce, protecting the human spirit behind the job title is not optional—it is essential for sustainable growth.

Also Read: 10 Signs Someone May Be Struggling with Anxiety or Depression

References:

• Butterworth, P., Leach, L. S., Strazdins, L., Olesen, S. C., Rodgers, B., & Broom, D. H. (2009). The psychosocial quality of work determines whether employment has benefits for mental health: Results from a longitudinal national household panel survey. Occupational and Environmental Medicine, 68(11), 806–812. https://doi.org/10.1136/oem.2009.047282
• Holmes, T. H., & Rahe, R. H. (1967). The Social Readjustment Rating Scale. Journal of Psychosomatic Research, 11(2), 213–218. https://doi.org/10.1016/0022-3999(67)90010-4
• Kerr, W. C., Kaplan, M. S., Huguet, N., Caetano, R., Giesbrecht, N., McFarland, B. H., … & Borges, G. (2020). Economic recession, alcohol, and suicide rates: Comparative analysis of 27 European countries. Addiction, 115(5), 937–946. https://doi.org/10.1111/add.14841
• Lițan, C. (2025). Technostress and its consequences: A structural equation modeling approach. Frontiers in Psychology. https://doi.org/10.3389/fpsyg.2025
• McKinsey & Company. (2023). The State of AI in 2023: Generative AI’s breakout year. https://www.mckinsey.comNASSCOM. (2023). Strategic review of India’s technology sector. https://nasscom.in