How AI Will Cause Job Losses in India and Hit the Economy
India faces millions of job losses due to rising use of artificial intelligence and other automation tools
January 29, 2025
Almost every week, senior executives of major global technology companies speak about the benefits of artificial intelligence (AI) tools. Many of them also warn of bad actors misusing the tools to produce destruction, instability, and catastrophes. Last month, for instance, Demis Hassabis spoke of these issues while accepting the Nobel Prize for Chemistry. He is the co-founder and chief executive of Google DeepMind, Alphabet’s London-based AI arm.
Technological changes, centered on AI and synthetic biology, will create new businesses and industries, improve the quality of life in every imaginable area and create wealth unlike anything ever seen, writes Mustafa Suleyman in The Coming Wave: Technology, Power, and the 21st Century’s Greatest Dilemma. The best-selling book, published in 2023, has gained renewed attention after Microsoft co-founder Bill Gates blogged last month that it was his “favorite book on AI.”
Since 2024, Suleyman, a co-founder of Google DeepMind with Hassabis, has been the CEO of Microsoft’s AI business, which is based in Palo Alto, California. Microsoft has also invested nearly $14 billion in OpenAI.
What technology executives rarely, if ever, discuss is how AI tools will eliminate hundreds of millions of jobs in the coming years.
Since OpenAI introduced its ChatGPT tool on November 22, 2022, the promise of AI has fueled a euphoric rally in chip maker Nvidia and other U.S. technology stocks. This powered a roughly 50% total return in the S&P 500 index of U.S. stocks, up until the November 2024 U.S. presidential election.
Meanwhile, over the past three years, the stocks of Tata Consultancy Services (TCS), Infosys and Wipro have been roughly flat. This is because of a decline in the revenue growth of these major Indian information technology (IT) services companies. In fiscal year 2023-2024, TCS had $29 billion in revenues. It currently has roughly 601,000 employees, down from over 614,000 at the previous year-end. Last year, job cuts at TCS, Infosys and Wipro totaled roughly 63,000.
Much of the revenues of Indian IT companies come from back-office IT services, including coding and other repetitive work, which is outsourced to them by U.S. and other Western companies. Several of these tasks are being automated by the use of AI tools. Is this why there is a drop in the revenue growth of Indian IT companies?
The major Indian IT companies are now offering AI, robotics and other automation services, while also pursuing automation of their internal operations.
In April 2024, K. Krithivasan, CEO of TCS told the Financial Times, that chat-bots - computer simulated conversation programs - will soon be able to analyze a customer’s transaction history and do much of the work done by call center staff. “That’s where we are going . . .maybe a year or so down the line,” he said.
TCS’s AI products include a conversational platform, in several languages, which helps companies automate and improve the quality of their customer service call centers. But AI products from Indian IT companies face intense competition.
For instance, there are more than 47 startups, in the U.S., Western Europe, and India, who sell products which automate call center work, competing with the TCS product. The startups, unlike the established Indian IT companies, aggressively pursue automating as many client operations as they can, without having to protect revenues from legacy businesses. The startups also have billions of dollars of funding from venture capital firms. It may be a few years before some of them emerge as winners with a large market share.
Meanwhile, the use of AI tools, which are rapidly improving customer service, must be reducing demand for call center jobs in India, Philippines, and elsewhere. This is because, in the U.S. and some other Western countries, self-service AI chat-bots already enable customers, of even small startups, to follow simple instructions and solve technical, bill payment, and other service issues. Similarly, staff at major banks and other companies use AI tools to more accurately and efficiently answer phone and online questions from customers. Since the staff tackle customer questions far more quickly, each of them now handles a far larger volume of calls than they did in 2022. So, the companies need fewer call center staff.
Two years ago, Bill Gates, the co-founder of Microsoft, said in a blog post that many of the tasks done by an employee in sales, service, or document handling, like payables, accounting, or insurance claim disputes, require decision-making but not the ability to learn continuously. Corporations have training programs for these activities and, in most cases, they have a lot of examples of good and bad work. “Humans are trained using these data sets, and soon these data sets will also be used to train the AIs that will empower people to do this work more efficiently,” Gates added.
Indeed today, as Gates anticipated, startups in the U.S. and other Western countries offer AI-based tools which automate data entry, accounting, legal, and other white-collar work.
More than a quarter of white-collar jobs around the world are at risk of being replaced by AI, according to a survey on corporate hiring plans for 2025-2030, released this month by the World Economic Forum. Two out of five employers plan to downsize their workforce as AI automates certain tasks, the survey noted.
Banking is the first major business which is expected to widely adopt automation. Earlier this month, a Bloomberg Intelligence report forecast that major Wall Street banks will cut up to 200,000 jobs over the next three to five years due to AI adoption. The use of AI tools, the report projected, could boost pre-tax profits of the banks by 12% to 17% by 2027, an additional $180 billion.
The expanding use of AI tools in the U.S. and the West will cause job losses at IT and other outsourcing firms in India, in addition to cuts by call center companies. So far, there is no data on such job losses published by government agencies or trade groups in India.
Apparently, the government of India does not see the coming AI job losses as a major issue. Last month, for instance, a senior government official said, “Our concerns with regard to job loss in India, particularly with generative AI, are probably not as intense as in the West where office jobs and white collar jobs are a lot more than what they are here," the Economic Times reported.
There are around 4.5 million employed by IT companies in India, including about 1.4 million in customer service and call center work, mainly for foreign companies, according to NASSCOM, the trade association of the Indian IT industry. These are high paying jobs.
Even if only a quarter of IT staff in India lose jobs due to AI, it will result in a roughly $7 billion drop in the country’s total household income. Consumer demand in India totals $1.2 trillion. So, the Indian economy faces a big hit from white collar job losses.
However, the number of job losses at Indian IT firms will likely be far higher. This is because automation will lead to a sharp drop in work outsourced to India by Western companies. Also, Indian IT companies will likely automate in order to compete against IBM, Accenture, and other Western companies, who are rapidly using AI tools to cut costs.
Overall, AI job losses will worsen the massive unemployment problem which India already faces.
The use of AI tools is spreading to new occupations. They are being used to write coherent text and computer code, generate stunning images, and compose music. They are also used to manage traffic, run warehouses, and diagnose rare medical conditions. AI will create extra-ordinary advances in medical technology, robotics, quantum computing, and even the creation of new clean energy sources, writes Microsoft AI’s Suleyman. He also suggests several steps to contain the bad actors, from building safeguards in AI tools to restricting access to the computer chips which run the tools.
Globally, jobs likely to be protected from automation involve skills rooted in human interaction – including empathy and active listening, and sensory processing abilities – and manual dexterity, endurance and precision, due to their physical and deeply human components, according to the World Economic Forum report. Jobs likely to be protected include advanced research by science, math, statistics and bio-medical PhDs, dentists, dermatologists, nursing, firefighters, and social work.
Warren Buffett says the use of AI tools raise profound questions about what happens to human-based work and leisure time, CNBC reported. The CEO of Berkshire Hathaway has a net worth of $147 billion, according to Bloomberg. Buffett notes that the AI “genie” being released from the bottle is reminiscent of the dawn of nuclear weapons and its unintended consequences.
(Story updated January 31, 2025.)