India's IT and white-collar job market faces a mounting threat from generative AI, with the Economic Survey 2025-26 warning of a "quiet drift" in employment as firms abroad increasingly automate routine cognitive work once outsourced to Indian professionals.
The Survey uses the U.S. Professional, Business, and Information Services (PBIS) sector as a lead indicator, citing its early AI adoption and structural similarities to India's services-heavy economy. It identifies a sharp shift post-December 2022 when generative AI tools became mainstream and where GDP growth no longer translates into proportional job creation.
This "weakened marginal responsiveness" marks a structural decoupling. "Jobs haven't vanished overnight," the Survey notes, "but for every unit of output growth, the employment response is now flatter."
It describes this as a "steady drift" rather than a sudden collapse, impacting roles tied to information retrieval, summarization, and repetitive business tasks.
A control test showed no such trend in less-digitized sectors, confirming the vulnerability is concentrated in white-collar, AI-exposed roles. As AI raises the marginal productivity of capital, firms especially those in cost-sensitive sectors are shifting toward automation over hiring, further altering the capital-labor balance.
This evolution has profound implications for India, which has long benefited from its low-cost IT services workforce. That advantage, the Survey warns, may erode rapidly as global firms opt for AI to perform the same tasks faster and cheaper.
"The historical back-office model is under threat," the Survey states, calling for policy intervention. It proposes the creation of an AI Economic Council to assess labor impacts and guide AI adoption in ways that preserve employment.
Without adaptive strategies to move workers into high-experience or judgment-intensive roles, India risks a future of jobless growth even in its most productive sectors, undermining its demographic dividend and economic resilience.
