Opinion | India & AI

India's $250 billion IT services industry and the broader $280 billion BPO sector are experiencing their first major existential crisis since inception. The threat is multifaceted and accelerating rapidly.

The displacement is already happening, not a future concern. Major Indian IT companies collectively laid off around 75,000 employees in 2022, with AI efficiency replacing human roles. The industry added only 60,000 new jobs in the past year, marking the lowest growth in over a decade. During the same period, India's top three tech companies reduced their workforce by over 60,000 employees.

The scope of potential disruption is staggering:

• Up to 38 million jobs could be transformed or eliminated by 2030

• 69% of jobs in India are at risk of automation over the next two decades, according to the World Bank

• The BPO sector's 1.4 million workers in vulnerable operations, with one-third in call centers, face immediate threat

Customer Service and BPO Operations: AI-driven chatbots now handle 45% of non-voice interactions (email/chat), reducing Average Handling Time by 20%. Companies report that 30-50% of voice and chat volumes are now handled by conversational AI. As the video highlighted, "call centres and technical support work that used to be outsourced to places like India are now using AI chatbots with a small skeleton crew."

IT Services and Coding: GitHub reports that AI-assisted coding tools now generate nearly 50% of new code in programming projects. Basic coding, testing, and system maintenance—core revenue generators for Indian IT—are being rapidly automated.

Business Process Automation: Intelligent bots now handle routine processes from invoice reconciliation to customer onboarding with minimal human supervision. AI can cut system downtime by 50%, eliminating massive support teams.

India's government has officially acknowledged this crisis. The Economic Survey 2023-24warns that AI casts a "huge pall of uncertainty" across all skill levels. This represents the first time a government document has officially flagged AI's job impact, stating that AI "is likely to restrain growth opportunities for business services progressively".

The survey warns these disruptions "will create barriers and hurdles to sustained high growth rates for India in the coming years and decades".

Unlike previous technological shifts, as the video emphasized, this transition is happening at breakneck pace. The video noted: "Work that is repetitive, boring and sensitive to labour costs is the perfect target for automation." Indian services, built on cost arbitrage and process efficiency, are particularly vulnerable.

The Competitive Threat: US companies are warned they "will cease using Indian outsourcing firms unless they replace human workers with automation". The traditional labor arbitrage model where Indian firms benefited from large headcounts is being fundamentally challenged.

IndiaAI Mission: The government has committed over ₹10,000 crore for AI ecosystem development. This includes:

• 200 IndiaAI data labs in Tier 2 and 3 cities for foundational AI courses

• Expansion of IndiaAI fellowship across diverse disciplines

• GPU access for candidates developing AI applications

FutureSkills PRIME Program: This massive reskilling initiative has enrolled 7 lakh candidates, with 1.2 lakh completing courses. It specifically targets those "who may have lost their existing jobs due to disruptive and emerging technologies".

Mass Upskilling at Scale: Industry experts emphasize that 84% of C-suite executives in India anticipate major transformations in 2025 due to AI integration. The focus must extend beyond technical training to include creativity, problem-solving, and adaptability to complement AI-driven automation.

New Role Creation: The transformation should generate 8-11 million new AI-adjacent jobsif handled correctly. These include:

• AI Coordinators: Managing chatbot performance and resolving edge cases

• Process Engineers: Designing hyperautomation workflows

• KPO Specialists: Handling complex analysis requiring human judgment

Human + AI Model: Leading companies are adopting "phygital" approaches where human intelligence augments AI capabilities. TCS reports that over 1 lakh employees have acquired higher-order AI/ML and GenAI skills, while Infosys has made 2.70 lakh employees "AI-Aware".

Value Chain Migration: Companies must move from cost arbitrage to AI integration leadership. Indian IT giants are repositioning as "premier integrators" rather than foundational AI developers.

Public-Private Collaboration: The Economic Survey calls for a "grand alliance of union and state governments and the private sector" to address AI disruption. This requires:

• AI-focused curriculums in educational institutions

• Accessible upskilling programs for traditional industry workers

• Public-private partnerships for comprehensive skill-building

Social Safety Nets: With such massive displacement potential, India needs robust social infrastructure to ensure inclusive and equitable AI-driven economic transitions.

If India fails to adapt, "its most skilled people look for better jobs in the West, its most physically able look for better-paying jobs in the Gulf states, and everyone who is left behind is made redundant."

Capital Economics warns that worst-case AI automation could reduce India's GDP growth by nearly one percentage point over the next decade. However, strategically managed, AI could contribute $438 billion to GDP by 2030.

India faces a race against time to capitalise on the advantages its huge population gives it before they are no longer competitive. The country's demographic dividend could become a demographic disaster if millions of service workers are displaced without adequate preparation.

The path forward requires unprecedented coordination between government, industry, and educational institutions to transform India from a cost-based service provider to an AI-augmented innovation hub. The window for this transformation is rapidly closing, making immediate, decisive action not just advisable—but essential for economic survival.