Indian think tank finds strong hiring for the kind of jobs AI puts at risk

AI is not killing Indian IT

The Council for Research on International Economic Relations (ICRIER) released a report this week stating that AI is not an immediate threat to the Indian IT services sector. The think tank’s case study, titled “Al and Jobs This Time Is No Different,” argues that AI will follow the same historical pattern as previous automation waves. While initial fears of mass unemployment are common, the researchers expect productivity gains to eventually lower costs and spark a massive expansion in consumer demand.

The report suggests that this cycle will ultimately generate net positive employment opportunities across the country. ICRIER reached these conclusions after surveying 651 IT firms and interviewing several prominent industry leaders. The data indicates that the current shift mirrors the transition to cloud computing or mobile internet rather than a total replacement of human labor.

Indian IT firms are currently using AI to augment their existing workflows rather than erase roles entirely. The study notes that while hiring has slowed down at the “big four” outsourcing giants, the underlying demand for technical talent remains stable. These firms are finding that AI handles repetitive tasks, allowing human workers to focus on more complex architectural challenges.

High skill roles remain in demand

The strongest demand from Indian employers centers on roles like software analysts, developers, and mathematicians. These specific positions are the most exposed to AI tools and automated coding assistants. However, the survey found that exposure does not equate to elimination in the current market.

ICRIER believes this hiring trend proves that AI functions primarily as a complement to high-skill technical work. Instead of substituting for human developers, AI tools allow these workers to produce more code in less time. This increased efficiency is currently driving a preference for experienced staff who can oversee AI-generated outputs.

The survey results provide a clear breakdown of how firms view their future staffing needs:

• 28 percent of firms expect to hire more workers because of AI adoption.
• 44 percent of firms expect no major change to their total headcount.
• 27 percent of firms believe their headcount will shrink as they integrate AI.
• Over 50 percent of respondents expect to slow down hiring for entry-level staff.

A majority of the surveyed firms reported significant productivity gains almost immediately after adopting AI tools. These gains manifest as higher-quality output and substantial savings in both time and operational costs. Most managers interviewed for the study view these efficiencies as a way to take on more projects rather than a reason to fire staff.

Entry level workers face new hurdles

The report highlights a growing divide between veteran developers and those just entering the workforce. While senior roles appear safe, more than half of the respondents plan to reduce their intake of junior staff. This general moderation of early career hiring suggests that the traditional "bench" of Indian IT firms is shrinking.

Junior employees traditionally performed the basic coding and testing tasks that AI now handles with ease. ICRIER observed that firms are no longer willing to pay for the long training periods that entry-level workers once required. This shift forces new graduates to enter the market with a higher baseline of AI proficiency than previous generations.

Researchers admit their projections for future hiring might actually be too pessimistic. They point out that history shows the most impactful technology jobs often come from companies that do not exist yet. These future startups are currently taking shape in garages and classrooms, and they will likely be AI-centric from day one.

New firms are expected to disrupt the incumbent outsourcing giants and generate the largest share of future employment. These startups will likely require entirely new categories of workers that the current survey cannot fully account for. India’s position as a global hub for technical talent gives it a distinct advantage in this transition.

India must fix its training gaps

The report warns the Indian government that success in the AI era is not guaranteed. ICRIER found that many IT firms are failing to invest in the specific infrastructure needed to stay competitive. Specifically, firms are not hiring enough workers with skills in large language model (LLM) operations.

Research and development divisions are not expanding at the rate necessary to keep pace with global competitors. The study also found that most companies are not investing adequately in training or upskilling their current workforce. This lack of internal development could leave Indian firms behind as generative AI capabilities evolve.

The study identifies several critical roadblocks for the Indian tech sector:

• A severe shortage of qualified AI trainers to educate the workforce.
• Limited AI skills among new graduates entering the labor market.
• Significant policy and regulatory uncertainty from the central government.
• Inadequate investment in proprietary AI research and development.

ICRIER insists that these challenges require urgent attention from both corporate leaders and policymakers. If India fails to address the skills gap, it may lose its status as the world's primary destination for outsourced services. The report suggests that the "outsourced to India" model will survive only if the workforce becomes masters of the tools that threaten them.

A sustained increase in demand

Despite the warnings, the think tank remains optimistic about India’s long-term job prospects. India currently holds one of the world’s largest pools of AI-skilled workers. As global demand for AI-enabled products expands, these workers will likely see a sustained increase in demand for their services.

The medium-to-long-run outlook suggests that the Indian IT sector will transform rather than disappear. Analysts expect the industry to move away from low-cost labor and toward high-value AI integration and consulting. This shift would solidify India's role in the global tech supply chain for the next several decades.

The report concludes that the fear of "outsourcing to AI" is currently overblown compared to the reality on the ground. Indian workers are already integrating these tools to maintain their competitive edge in the global market. While the entry-level path is becoming more difficult, the overall trajectory for the IT sector remains upward.

Government officials must now decide how to provide the regulatory clarity that firms are asking for. Clear rules on data usage and AI ethics will help firms invest with more confidence. Without this stability, the "net positive" employment gains predicted by ICRIER could remain out of reach.