Artificial intelligence arrived with a bang, first sparking curiosity, then excitement, but now, increasingly, fear. Fear for jobs, for livelihoods, for the very structure of India’s burgeoning middle class. Headlines from Bengaluru to Silicon Valley paint a stark picture: companies are shedding jobs, and AI is frequently cited as the reason.

India’s famed IT sector, the engine of white-collar employment for millions, is feeling the pinch. Tasks once handled by legions of coders, testers, and customer support staff are now being automated by AI. Mumbai entrepreneur Arindam Paul’s stark warning on LinkedIn — that 40-50 percent of India’s white-collar jobs are at risk — resonates deeply with this reality.

The International Labour Organization echoes this, suggesting 70 percent of jobs face automation risk, with IT and BPO sectors particularly vulnerable. Fintech major PhonePe, for example, reportedly cut 60 percent of its customer support staff over five years by leaning into AI solutions.

This isn’t science fiction; it’s happening now.

AI Boosts Company Efficiency

But there is another side to this story, one less focused on doom. AI is also a significant productivity multiplier. Reports like PwC’s 2025 AI Jobs Barometer indicate productivity in AI-exposed industries has nearly quadrupled since 2022.

Indian firms, from financial institutions to e-commerce platforms, are leveraging AI to analyse vast datasets, optimise operations, and enhance customer service speed. In banking, AI-powered risk models are improving predictive accuracy by over 25 percent, according to McKinsey. Chatbots handle routine customer queries, allowing human staff to concentrate on more intricate issues like resolving disputes.

In manufacturing, AI streamlines supply chains, leading to cost reductions and less waste. The Economic Survey 2023-24 highlighted AI’s capacity to revolutionise healthcare and finance, elevating service quality and user experiences. For India, with its young populace and varied infrastructure, these efficiency gains are crucial for maintaining global competitiveness.

Still, efficiency feels like a poor substitute when you’re facing unemployment.

IT Sector Hiring Collapse

Why does this matter so much? India’s IT sector, employing 5.4 million people, has been a golden ticket into the middle class. Hiring figures tell a worrying tale: 600,000 engineering graduates found IT jobs in 2022, but only 250,000 in 2023. Projections for 2024 suggest a 20-year low of just 70,000-80,000 hires.

Microsoft, a significant employer here, cut 6,000 jobs in May 2025, attributing this to AI restructuring, with LinkedIn roles in Bengaluru affected. These instances aren’t isolated.

As AI tools like ChatGPT-4 write and debug code or manage queries rapidly, the need for human intervention diminishes. The World Economic Forum predicts a net global loss of 14 million jobs by 2027, and India’s process-centric white-collar roles are primary targets. The Bank of Baroda projects 20-25 million Indian jobs could vanish by 2030.

The Skills Gap Challenge

The optimistic view is that AI will create new jobs, mirroring the IT boom’s impact. Roles like AI trainers, prompt engineers, and cybersecurity experts are emerging. A 2024 IIM Ahmedabad study found 53 percent of white-collar workers believe AI will unlock new avenues.

The critical question is whether Indian workers possess the necessary skills. These new roles demand capabilities currently lacking in the majority of the workforce. NASSCOM estimates only 17 percent of our workforce possesses the required technical and cognitive skills for the AI era. Our education system, largely designed to produce graduates for routine coding, seems ill-prepared for this shift.

Reskilling is frequently discussed, but it is a slow, resource-intensive process. And what about the millions unable to transition into highly specialised roles like AI ethicists? They risk being sidelined in an increasingly limited job market.

Urgent Policy Needed Now

The government’s response so far appears tentative. While acknowledging the pressing need for reskilling, concrete action feels absent. India’s STEM graduates require training initiatives that can keep pace with AI’s disruptive speed.

The drive to integrate AI into industries, while positive, often focuses on urban centres, neglecting rural India, where agriculture sustains millions. Without decisive policies, the urban-rural divide could widen, exacerbating unemployment, migration, and disparity.

AI’s efficiency – faster data crunching, cleaner code, round-the-clock service – is clear, but what is the human cost? If India’s middle class, the backbone of its consumption economy, weakens, the ‘India growth story’ risks faltering.

The path ahead requires urgent government intervention: scale up reskilling programmes, overhaul education for AI-relevant competencies, and encourage industries to focus on job creation, not just job cuts. Companies must invest in their people, not just algorithms. Workers, too, must adapt, acquiring new skills, as clinging to old ones is a dead end street.

AI itself is not the antagonist, but ignoring its profound impact certainly is.