AI and India’s job market
Each decade, a technological shift occurs that fundamentally transforms the relationship between work and society. The steam engine, electricity, and the internet each rewrote the rules of employment. Today, India stands at the precipice of another such transformation. One driven by artificial intelligence. But unlike previous revolutions, the story of AI’s impact on India’s job market defies simple narratives of mass displacement or unchecked optimism. It is a story of paradoxes: moderation in entry-level hiring alongside surging demand for AI-skilled professionals; global leadership in AI talent acquisition coexisting with deep structural inequalities; and the promise of four million new jobs shadowed by the risk of significant displacement.
The most comprehensive study to date on AI’s impact on India’s workforce comes from the Indian Council for Research on International Economic Relations (ICRIER), supported by OpenAI. Conducted between November 2025 and January 2026, the survey of 650 IT firms across 10 Indian cities reached a conclusion that challenges prevailing anxieties: generative AI is not triggering mass layoffs in India’s IT sector. “Everyone has opinions on this matter,” noted Shekhar Aiyar, Director and Chief Executive of ICRIER, “but the ICRIER–OpenAI study brings evidence to the table.” What the evidence shows is that AI is primarily functioning as a “productivity-enhancing complement to technical and analytical work, rather than a substitute.” Roles commonly perceived as most vulnerable to automation, such as software developers and database administrators, are actually experiencing the strongest growth in demand.
Across more than 1,900 business divisions identified as most affected by AI, productivity gains significantly outnumber declines. The study found that divisions reporting higher output with stable or reduced team sizes outnumber those experiencing productivity declines by a ratio of 3.5 to 1. Nearly one-third of divisions report both increased output and reduced costs, indicating that AI is enabling firms to scale output more efficiently without corresponding reductions in employment. This is not to suggest that AI has no effect on hiring patterns. Firms report “a modest moderation in hiring, primarily concentrated at the entry level, alongside stability at mid and senior levels.” Researchers caution that this moderation aligns with broader post-pandemic trends in the IT industry and cannot be attributed to AI adoption alone. Yet the signal is clear: the pathway into technology careers is shifting, and entry-level roles are bearing the initial weight of transformation.
If AI is not eliminating jobs wholesale, what is it changing? The answer lies in the nature of work itself. The ICRIER study found that 63 per cent of firms reported increased demand for candidates with domain expertise and AI or data skills, pointing to a growing premium on hybrid skill sets as AI is integrated into core workflows. This premium on hybrid skills reflects a fundamental reorientation of what employers value. Ronnie Chatterji, Chief Economist at OpenAI, observed: “We are seeing a shift in how work is organised, where AI appears to be complementing human talent. This data offers a window into the transition underway in India.”
Yet the response to this shift remains dangerously inadequate. While more than half of surveyed firms report that they are already supporting AI adoption through awareness or training initiatives, with an additional 38 per cent planning to do so, training coverage remains limited. Only a small share of firms report that more than half of their workforce has received AI-related training in the past year. Chatterji highlighted this gap as a critical vulnerability: “Currently, only 4 per cent of firms have trained more than half their workforce in AI, presenting a huge opportunity for growth.” The key challenges cited include difficulty finding qualified trainers, high costs and uncertain returns, ethical and legal concerns, and organisational readiness.
On the surface, India’s position in the global AI economy appears enviable. According to the Stanford AI Index Report 2025, India leads the world in AI talent acquisition, with an annual hiring rate of about 33 per cent, and ranks among the top countries globally in AI skill penetration. AI talent concentration has grown more than threefold since 2016, and India ranks among the top three countries in Stanford’s Global AI Vibrancy Tool. Industry estimates project that India’s AI talent base will more than double by 2027, growing at a compound annual growth rate of around 15 per cent. Global data on GitHub AI projects shows India as the second-largest contributor worldwide in 2024, accounting for 19.9 per cent of all AI projects. According to NASSCOM, India possesses the world’s largest digitally skilled talent pool and has the capacity to reskill and develop 8-10 million professionals in AI-related services by 2030.
Yet beneath these impressive aggregates lies a more troubling reality. While AI transforms the formal tech sector, the International Labour Organisation’s Global Employment and Social Trends 2026 report paints a sobering picture of the Indian labour market. India’s job growth mainly comes from demographic changes rather than improvements in job quality, secure contracts, better pay, or social protections. The scale of informality is staggering. The ILO predicts that by 2026, around 2.1 billion workers worldwide will be in informal jobs, with the fastest growth happening in Southern Asia. India is a major contributor to this trend, with 80 to 90 per cent of its workforce involved in informal or semi-formal work. Most of these workers do not have written contracts, paid leave, or social security, even though this sector generates about 50 per cent of the country’s GDP.
This informality affects women and young people disproportionately, with around 94 per cent of women workers and nearly 98 per cent of youth aged 15 to 24 engaged in informal jobs. The gig economy, which depends on platforms, is booming. The number of workers is expected to jump from 7.7 million in 2020-21 to 23.5 million by 2029-30. Yet these workers typically lack formal protections. Meanwhile, the digital divide creates what observers call a “two Indians” scenario: internet access in rural areas is only 37 per cent, compared to 64 per cent in urban areas. Without proactive intervention, technological advancements might worsen labour market inequalities rather than improve them.
Recognising both the promise and peril of AI-driven transformation, NITI Aayog released a “Roadmap for Job Creation in the AI Economy” in October 2025. The report, developed in collaboration with NASSCOM and BCG, presents a nuanced assessment: while India’s tech services sector faces the threat of significant job displacements by 2031, it also has the opportunity to create up to 4 million new jobs in the next five years. The roadmap identifies specific roles at risk: “Without swift action, routine roles such as QA engineers and L1 support agents risk rapid redundancy.” But it also identifies emerging opportunities: “with the right skilling, reskilling, and innovation pathways, India could emerge as a global hub for AI-first roles from Ethical AI Specialists and AI Trainers to Sentiment Analysts and AI DevOps Engineers.”
The roadmap envisions a mission-mode approach anchored on three key pillars: embedding AI across the education system to make AI literacy a foundational skill; building a national reskilling engine to upskill millions of professionals; and positioning India as a global AI talent magnet. Debjani Ghosh, Distinguished Fellow at NITI Aayog, emphasised the stakes: “The difference between job loss and job creation depends squarely on the choices we make today.”
The government has launched multiple coordinated initiatives to address the AI skills challenge. Under the IndiaAI Mission, through the IndiaAI FutureSkills pillar, the government is supporting 500 PhD scholars, 5,000 postgraduates, and 8,000 undergraduates for AI-related work. Twenty-seven IndiaAI Data and AI Labs have been established in Tier-2 and Tier-3 cities. An additional 174 ITIs and Polytechnics across 27 States have been approved to set up additional AI labs. The FutureSkills PRIME initiative has enrolled over 25.3 lakh registered learners. Under the IndiaAI Mission, the Government has allocated over Rs. 10,300 crore to strengthen AI capabilities and expand compute capacity beyond the existing 38,000 GPUs, with an additional 20,000 high-end GPUs to be added. Offered at a subsidised rate of Rs. 65 per hour, this compute access reduces entry barriers for startups, young innovators, and public institutions.
The evidence from these multiple studies points to several conclusions. First, the narrative of mass displacement is not supported by the data. AI is not eliminating jobs wholesale; it is transforming them. The ICRIER study’s finding that productivity gains outnumber declines by 3.5 to 1 suggests that AI is, for now, functioning as a tool that augments human capabilities rather than rendering them obsolete. Second, the transformation is unevenly distributed. Entry-level hiring is moderating, while demand for AI-skilled professionals surges. This creates a dual challenge: how to support young workers entering a shifting job market, and how to upskill existing workers whose roles are evolving. Third, India’s strengths in AI talent acquisition provide a foundation for leadership, yet these coexist with deep structural weaknesses: widespread informality, inadequate social protection, and a digital divide that threatens to exclude millions from the AI revolution. Fourth, the window for action is narrow. As NITI Aayog’s roadmap makes clear, the difference between job loss and job creation depends on the choices made today.
The opportunity to create up to 4 million new AI-related jobs exists alongside the risk of significant displacement by 2031. The ILO’s warning that “stable unemployment figures do not necessarily indicate progress toward decent work” is a reminder that the measure of success is not merely the number of jobs, but their quality, security, and accessibility. For India, reclaiming decent work in the age of AI is both an economic need and a social obligation. The research is clear. The evidence is on the table. The question now is whether India will act with the urgency the moment demands.
Sunil Kumar, Scholar, Indian Institute of Management Jammu
