The rise of artificial intelligence (AI) is causing a significant upheaval in India's tech industry, leading to widespread layoffs and potentially derailing the aspirations of the country's burgeoning middle class. While AI promises increased efficiency and innovation, its impact on the job market is raising serious concerns about economic stability and the future of work.

The Scale of the Layoffs

Recent reports indicate a massive wave of layoffs in the Indian IT sector, with estimates exceeding 125,000 job losses across major firms. Tata Consultancy Services (TCS), India's largest IT services company, has announced plans to cut approximately 2% of its global workforce, affecting over 12,000 employees. These layoffs are primarily attributed to AI-led automation, Generative AI disruption, and a push for cost-cutting and efficiency. Layoffs are also happening because of limited options to redeploy employees who do not match current project requirements.

The current wave of job cuts surpasses previous transitions, such as digital transformation and cloud migration, in scale and impact. During the cloud adoption phase (2012-2018), layoffs increased to 50,000-70,000. The current AI and automation phase (2023-2025) is estimated to have over 125,000 layoffs across major firms.

Impact on the Middle Class

The AI-driven layoffs are disproportionately affecting mid-level professionals and those in roles involving repetitive or process-driven tasks. These include positions such as manual software testing, BPO and support agents, data entry operators, and routine application support engineers, which have traditionally formed the backbone of India's IT and BPM export model. The concentration of job losses in these segments poses a direct threat to the stability and aspirations of India's middle class. Mumbai-based entrepreneur and Atomberg founder Arindam Paul has warned that AI could significantly reduce white-collar jobs in India and that without enough well-paying jobs in manufacturing, AI-driven job losses could threaten India's middle class and overall economic growth.

The situation is further exacerbated by the fact that starting salaries in the IT industry have stagnated for a decade, while living costs have continued to rise. This has made the middle class more reliant on personal debt for consumption and basic necessities, increasing their vulnerability to economic shocks such as job losses.

The Skills Gap and the Need for Reskilling

A key factor contributing to the layoffs is the widening skills gap in the IT industry. As AI and automation technologies advance, the demand for traditional IT skills is declining, while the need for expertise in areas such as AI/ML, GenAI, and data science is rapidly increasing. Many mid-level and senior professionals are struggling to adapt to these changing requirements, making it difficult for companies to redeploy them effectively.

To address this challenge, there is an urgent need for reskilling and upskilling initiatives to equip the existing workforce with the skills required for the AI-driven economy. The Indian government, along with educational institutions and industry players, must collaborate to create affordable and accessible programs that focus on emerging technologies. India needs to reskill more than 1 million workers.

Future Prospects and Challenges

While the AI-driven disruption poses significant challenges, it also presents opportunities for India to become a global hub for AI talent. Industry estimates suggest that India will require over one million AI-trained workers by 2026. The AI sector is projected to reach $28.8 billion by 2025, with a compound annual growth rate of 45%. The AI sector is poised to surpass 2.3 million job openings by 2027.

However, realizing this potential requires a proactive approach to address the skills gap, promote innovation, and create a supportive ecosystem for AI development and deployment. It is also crucial to diversify the economy and create well-paying employment opportunities in other sectors, such as manufacturing, biotechnology, and pharmaceuticals, to reduce the over-reliance on the IT sector.

Conclusion

The AI revolution is transforming India's tech landscape, bringing both opportunities and challenges. While AI has the potential to drive economic growth and improve productivity, it also poses a threat to the job security and aspirations of the middle class. To mitigate the negative impacts and harness the full potential of AI, India needs to prioritize reskilling initiatives, promote innovation, and diversify its economy. Only through a concerted effort can India navigate the AI-driven disruption and ensure a prosperous future for all its citizens.