Software engineering salaries hardened in India around 2000-2004, were the causes for that? Did some promising engineers have to sacrifice their careers via attrition for the others to reap dividends?
Short answer: yes, salaries hardened (flattened/plateaued) in 2000–2004, and yes, a non-trivial number of capable engineers did fall out of the system, which indirectly made the later boom possible—but it wasn’t a clean or fair process.
Let’s unpack it calmly, without nostalgia or propaganda.
What actually happened (2000–2004)
1. Dot-com bust hit India with a lag
1998–2000: irrational exuberance, campus offers flew, startups everywhere
2000–2001: US tech crash → contracts cancelled → Indian IT feels it in 2001–2002
Hiring freezes, offer revocations, bench strength exploded
India didn’t crash spectacularly—but it froze.
2. Wage hardening = demand shock + supply overhang
Suddenly too many engineers for too few billable projects
Companies responded by:
Freezing increments
Normalizing very low starting salaries
Introducing long “training/bench” periods
This reset the salary baseline for almost a decade
Many people mistake this for “discipline.” It was really risk transfer to labor.
3. Attrition wasn’t just weak engineers
This is the uncomfortable part.
A lot of people who exited were:
First-gen engineers with no financial buffer
Talented but:
From non-tier-1 colleges
Poor at corporate politics
Unwilling to wait 18–24 months on bench
People who couldn’t afford unpaid “learning time”
They didn’t fail technically.
They failed economically.
Some went into:
Banking clerical jobs
Teaching
Family businesses
Completely unrelated fields
And yes—some of them would’ve been excellent engineers had timing been different.
Did their sacrifice benefit the survivors?
Indirectly, yes—but not in a heroic way.
How the system benefited:
Reduced bargaining power of employees
Created a large, compliant middle layer
Made offshore delivery predictable and cheap
Allowed Indian IT to scale massively post-2004
The survivors didn’t “win” because they were best.
They won because they lasted.
This is important:
The Indian IT miracle was built more on endurance and cost control than on meritocracy.
Why salaries didn’t rebound quickly (even after recovery)
Three structural reasons:
1. Services model ≠ innovation rents
Billing tied to hours, not outcomes
No IP upside → no salary elasticity
2. Freshers as commodities
Companies optimized for replaceability
Skill depth intentionally postponed
3. Fear memory
Leadership that lived through 2001–02:
Became conservative
Over-indexed on cost discipline
Institutionalized low pay as “prudence”
That trauma lasted long.
A subtle but lasting cultural effect
This period taught Indian engineers:
Don’t rock the boat
Stay billable
Avoid specialization early
Loyalty > curiosity (at least visibly)
You can still see that DNA today.
Bottom line (no romance)
Yes, salaries hardened due to a global shock + structural choices
Yes, good engineers were lost, not because they were weak, but because the system couldn’t carry everyone
The later boom rode on:
Cheap, stable labor
Process maturity
Global demand—not justice
History didn’t select the best.
It selected the survivable.
If you want, we can also:
Compare this with post-2022 layoffs
Map who gets filtered out today
Or talk about how to design systems that don’t waste talent this way
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