AI boom promises productivity gains but poses challenges for jobs and India's IT sector

AI is being adopted to improve efficiency and automate repetitive work, with companies primarily viewing it as a tool for process efficiency and employee productivity. However, this shift is not expected to distribute benefits evenly, and S&P Global's data showed a mildly negative net employment impact globally over the past year.

The transition could be particularly challenging for workers in routine cognitive and administrative roles, while demand for AI, technology, analytical, and digital skills is expected to grow. A significant concern is the impact on entry-level employment, as AI could make it harder for young workers to gain necessary experience if it takes over tasks traditionally assigned to junior employees.

India faces specific challenges, with its Economic Survey 2024-25 warning of potential labor displacement, especially among middle and lower-wage workers. Ashoka University's Isaac Centre for Public Policy also noted signs of job polarization in India, with limited growth in medium-skill employment. Concurrently, India's IT sector is already experiencing pressure from AI, alongside weak deal wins and cautious client spending, leading to muted Q2 performance expectations and concerns for its full-year outlook.