AI disruption exposes India’s growth story with declining high-paying IT jobs

Few global events have managed to derail India’s growth trajectory. Even as geopolitical tensions in the Middle East disrupt global supply chains, the International Monetary Fund (IMF) has reaffirmed that India is likely to remain the fastest-growing major economy in 2026.

But, recently Global research firm Bernstein in an open letter flagged a deepening employment challenge, cautioning Narendra Modi about the growing risks posed by artificial intelligence, particularly to quality jobs in the IT sector.

For decades, India’s IT and business process outsourcing industries have powered the rise of an aspirational middle class. Employing an estimated 10–15 million people, these sectors have driven consumption across housing, education, travel, and services. But generative AI is now disrupting this model, shifting the advantage from labuor arbitrage to technology-led efficiency.

This transition raises broader concerns. India’s growth has long depended on its demographic dividend and consumption-driven expansion. However, without sufficient job creation, this model faces strain, especially at a time when global export-led growth is becoming more uncertain.

“Without job creation, India’s consumption-led economy will struggle to grow, limiting investment demand at a time when the export growth-led model is at risk globally,” Shumita Sharma Deveshwar, Chief India Economist at GlobalData TS Lombard, told a news source.

“India has struggled to raise the share of manufacturing in the economy to shift labour from farm to factories,” she said, adding that the AI boom now poses a threat to jobs in both manufacturing and services.

Structural challenges persist. Nearly 45% of India’s workforce remains dependent on agriculture, which contributes only about 15–16% to GDP, as per Bernstein.

In an interview with the news source, Ashwini Vaishnaw, India’s IT minister, acknowledge the disruption. The government has emphasized upskilling and reskilling as critical responses, positioning AI as a force that could ultimately reinvent the IT sector.

“Not all jobs are at risk of being replaced by AI,” said Alexandra Hermann Prasad, Lead Economist at Oxford Economics, but added that the major issue was much of the workforce lacked the skills to shift into complementary roles that benefit from AI. The “weak overall education outcomes” play a key contributing role, she added.

But even as AI-driven reskilling accelerates with unclear prospects, jobs in the IT sector are already declining.

Meanwhile, the impact is already visible. IT firms are reducing headcount even as they invest in AI transformation. Hiring has slowed sharply, entry-level opportunities are shrinking, and companies are prioritizing productivity over scale. The industry is undergoing a structural reset, maintaining revenue growth while flattening workforce expansion.