For thirty years, the information technology industry in India has witnessed continuous growth, as have the salaries and stock of its workers, which has contributed to the growth of the modern Indian middle class. According to the National Association of Software and Services Companies (NASSCOM), the sector’s revenues this year will exceed nearly $315 billion, accounting for about 10-12% of India’s GDP and about 25% of services exports.
The advent of artificial intelligence (AI) is changing everything. The big question now is: Will this sector continue to build and support India’s middle class?
Ajay Choudhary, co-founder of Hindustan Computer Limited (HCL), described this concern as a “dangerous overreaction to artificial intelligence.” Writing via email, he notes that much of the public excitement revolves around consumer applications. “Our companies address the enterprise market.” What this means is that Indian companies build and maintain software systems that run banks, insurance companies, manufacturers and governments. These systems process payroll, manage inventory, transfer money, and store records.
In this context, AI writes the first draft of the code, speeds up testing and helps with documentation. Engineers refine deliverables, adapting them to specific business needs and solving complex problems. Chaudhary acknowledges that there will be “some impact on entry-level roles” and that the industry is entering “a different orbit of productivity”. Value shifts from “billable hours to faster, higher quality results.”
When asked if this meant fewer engineers would be needed for these jobs, he insisted the impact would only be “entry-level”. His optimism depends on replacement. He adds that new demand will emerge. “For example, there is a need to create our own chips to replace Chinese chips for security reasons.” There is quantum computing for general tasks, and quantum-based security systems that can be deployed globally. Companies like HCL, Cyient, Persistent and TCS already have adequate engineering depth. These areas require research investment and proprietary capabilities. It is not measured by multiplying entry-level billable hours.
In brief, Choudhury’s counterargument is this: some types of work may shrink, but others will grow. The net result will become clear as companies move decisively up the value chain.
When the same set of questions was sent to Nandan Nilekani, Chairman of Infosys, he referred to his comments at the recently concluded India AI Summit. There, he explained that AI is a layer that intersects workflow. It is not a tool that replaces workers. The bank processing the loans may use artificial intelligence to summarize documents and report risks. But humans remain responsible for decisions. Nilekani emphasizes redesign and reskilling, but does not expect roles to be eliminated en masse.
A recent HSBC report agrees with Choudhury and Nilekani. The systems that exist now are built on reliability and auditability. Instead of removing them, it is expected to be combined with artificial intelligence to improve efficiency while keeping the spine intact. HSBC expects these upgrades to begin contributing meaningfully to software revenues from this year onwards.
Few in India expect jobs to collapse, but neither do they promise immunity from this seismic shift. They all agree on the fact that productivity per engineer will rise. Meanwhile, data in the public domain suggests that the cost per line of code will fall from $15 to $2. That’s why Shrinath V, a Bengaluru-based technology consultant who advises companies on AI adoption, believes this is the beginning of the end for jobs in the IT industry.
“The challenge they will face is that as AI advances, more can be done for each person. This is not just for IT companies, but for their customers as well.” When this happens, clients who used to outsource earlier will no longer be able to justify why they outsourced. “They can do it on their own with a small, capable internal team,” says Shrinath.
The second reason the labor market has been affected, he says, is that until now the business model for Indian IT services has been built on volumes. This means there are a large number of people working on projects. But now, if you get more efficiency with fewer engineers, “how will you survive when your requirements are lower? That’s not clear.”
The third issue of Shrinath Flags is all about skills. “Many excel at project and operations management. But AI requires a completely different kind of thinking, which is about solving problems. Do they have the number of people who can build it?”
HSBC, Nilekani and Chowdhury report on bringing engineers into new sectors to rebuild companies for the new era. This means rehabilitating existing ones. “This is what happened to design thinking,” Shrinath points out. “As curiosity about the topic grew, one of the largest IT companies retrained all their employees on it,” he notes. “Nothing happened; the CEO moved on; however, there was no IT interest.”
Between these two worldviews lies an inflection point. If AI succeeds in accelerating delivery as complexity continues to rise, Indian IT will soar, revenues will continue to grow, and the great Indian middle class will not disintegrate. However, if AI succeeds in compressing the need for outsourced labor faster than new high-value businesses emerge, the calculus will change. The answer will determine the course of India’s next generation of engineers, and its middle class.
