Good day, that is Priyanka Salve, writing to you from Singapore.
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Over the previous 20 years, India’s IT sector has been driving a consumption growth that has in some ways anchored the India development story. However as AI forces IT firms to shift away from quantity hiring, it exposes a crucial hole that dangers hampering financial development: a scarcity of high quality jobs.
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The massive story
Few international occasions have dented India’s fabled development story.
Even because the battle within the Center East disrupts international provide chains, the IMF earlier this month reaffirmed its forecast that India will stay the fastest-growing giant financial system in 2026.
However final week, international fairness analysis agency Bernstein wrote an open letter to Indian Prime Minister Narendra Modi, warning of a deepening employment disaster within the nation, particularly as synthetic intelligence threatens high quality jobs within the data expertise sector.
These jobs with comparatively excessive wages and productiveness have had spillover results throughout actual property, schooling, and companies, making white-collar employment a key pillar of the nation’s financial development.
For the previous 20 years, 10 million to fifteen million Indians working in IT companies and the enterprise course of outsourcing business have anchored the “aspirational center class—shopping for properties, taking flights, driving consumption,” Bernstein mentioned. “Gen AI now challenges that template.”
India’s IT sector used to outcompete international friends because the huge expertise pool at comparatively low price gave it an edge, specialists mentioned. However AI has tilted this equation in favor of tech arbitrage, from labor arbitrage earlier. The dearth of high quality jobs will stress-test the India development story, which depends on the demographic dividend and home consumption.
“With out job creation, India’s consumption-led financial system will wrestle to develop, limiting funding demand at a time when the export growth-led mannequin is in danger globally,” Shumita Sharma Deveshwar, chief India economist at GlobalData TS Lombard, advised CNBC.
“India has struggled to boost the share of producing within the financial system to shift labour from farm to factories,” she mentioned, including that the AI growth now poses a risk to jobs in each manufacturing and companies.
Near 45% of India’s workforce continues to rely upon agriculture, which solely contributes 15%–16% of its GDP, in line with Bernstein.
Disappearing jobs
In an interview with CNBC-TV18 in the course of the AI Summit earlier this yr, Ashwini Vaishnaw, India’s IT minister, acknowledged that disruption to jobs within the tech sector was a “real challenge,” however confused that the answer was in “upskilling and reskilling the workforce.” The Indian authorities expects AI to reinvent the nation’s IT sector.
“Not all jobs are vulnerable to being changed by AI,” mentioned Alexandra Hermann Prasad, lead economist at Oxford Economics, however added that the main problem was a lot of the workforce lacked the talents to shift into complementary roles that profit from AI. The “weak general schooling outcomes” play a key contributing function, she added.
However whilst AI-driven reskilling accelerates with unclear prospects, jobs within the IT sector are already declining.
IT agency Cognizant on Wednesday mentioned it had rolled out ‘Venture Leap’, a brand new program for AI transformation that includes not solely workforce reskilling but also job cuts. A report by Indian newspaper Mint mentioned that as much as 4,000 individuals may very well be laid off as a part of that AI push.
NEW DELHI, INDIA – JUNE 18: Job aspirants throughout a mega job honest organized by Congress Delhi unit and Indian Youth Congress on the event of Chief of Opposition within the Lok Sabha and celebration chief Rahul Gandhi’s fifty fifth birthday, an occasion that aligns carefully with one in all Gandhi’s central political themes: unemployment, at Talkatora Stadium, on June 18, 2025 in New Delhi, India.
Hindustan Occasions | Hindustan Occasions | Getty Pictures
“Headcount rationalisation is going on throughout the board,” mentioned Sushovon Nayak, senior analysis analyst, at Mumbai-based Anand Rathi Institutional Equities, including that internet hiring by India’s high 5 IT firms dropped by round 7,000 within the monetary yr ended March 2026.
In response to native media experiences, India’s largest IT agency, Tata Consultancy Services, which laid off 12,000 last July, has plans to hire just 25,000 fresh graduates this yr in comparison with a median of 40,000 new hires over the past three years.
For the final 5 years, gross hiring of IT companies averaged round 230,000, however within the monetary yr ending in March 2026, they added round 170,000, in line with Nayak.
Others within the business additionally see a transparent shift in India’s IT business, which is shifting away from quantity hires.
Earlier than AI, India’s comparatively low-cost expertise was a key to driving development in IT firms, however now these companies are specializing in growing productiveness, specialists mentioned.
“FY26 noticed a structural reset the place firms centered on productivity-led development somewhat than large-scale hiring,” Kapil Joshi, chief govt of IT staffing at Quess Corp, advised CNBC. “Headcount development has flattened, whilst revenues stay secure,” he mentioned.
Conventional IT roles are being considerably expanded to incorporate AI capabilities, requiring publicity to giant language fashions, whereas IT firms are posting fewer entry-level vacancies, as per the info shared by the staffing agency.
As job creation within the IT business is slows down, specialists aren’t too hopeful that India can generate high quality jobs in different sectors to fill the hole.
“Ten-plus years of ‘Make in India’ has not but triggered a producing renaissance,” Richard Rossow, senior adviser and chair on India and rising Asia economics at coverage assume tank CSIS, advised CNBC. Very similar to Bernstein, Rossow agrees that manufacturing continues to be a “comparatively small a part of the financial system,” whereas fundamental agriculture stays the most important supply of employment.
India’s rising gig financial system, which affords principally low-value employment, will be unable to make up for high quality jobs in companies or manufacturing, specialists mentioned.
With out creating new swimming pools of high quality jobs — or quickly reskilling its workforce — India dangers confronting a extra fragile model of its development story, one the place sturdy headline GDP masks rising unemployment.
Have to know
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Arising
April 30: India fiscal deficit information as of end-March.
Could 6: HSBC India composite PMI for April.