Artificial intelligence will disrupt India’s services sector, especially software companies, but fears of a doomsday scenario are overblown, former Reserve Bank of India Governor Raghuram Rajan said on Friday, downplaying fears of a widespread job crisis due to rapid technological advances.
In an interview with Bloomberg Television, he acknowledged that AI poses a challenge, but emphasized that “the Indian services story may still persist in many other areas beyond software.”
“Things take time. Companies that aren’t tech-savvy will take longer. That’s all,” added Rajan, a professor at the University of Chicago Booth School of Business.
His remarks come as several tech entrepreneurs and executives have warned of the potentially severe impact of AI adoption on employment, particularly in basic and routine white-collar jobs.
AI could lead to more demand
Even as software companies cut staff as AI becomes more widely adopted, the technology could also create new demand for workers, Rajan said. The country’s software firms and their employees will have to retool and retrain “really quickly,” he warned, adding “this is not something they can’t overcome.”
India has long been considered the world’s back office, powering everything from call centers to IT outsourcing. These industries are at high risk of disruption as AI automates the routine coding and customer support tasks that employ millions of people in the country and several more preparing to enter the workforce in the coming years.
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A recent report by Citrini Research warned that Indian IT firms could experience pressure on earnings, triggering a sell-off in their shares earlier this week. “Let’s not get too wrapped up in science fiction and think that’s the outcome,” Rajan said, referring to Citrini’s remark.
“The fastest adopters of technology are the people who create the technology. Sometimes we feel like it’s going really, really fast. What they don’t see is the adoption across borders is much longer,” he said.
Major job displacement unlikely: Rajan
Rajan also noted that many companies around the world have yet to implement AI at scale, leaving significant opportunities for software firms to step in. He said the transition would likely be gradual, making the prospect of large-scale moves unlikely, Bloomberg reported.
He also pointed to multinational companies continuing to expand their global capability centers in India and moving more high-end engineering and digital functions to the country, a trend that could offset disruptions in routine roles, according to Bloomberg.
“The reason many companies are moving to India is its highly skilled service workers,” with a consultant in the country “one-fifth the price of a consultant in the West.” That cost advantage, combined with access to the same AI tools, helps level the playing field, he said.
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According to a BCG report released last December, India’s global talent position is steadily strengthening. The country gained 1.9 percentage points in the share of global AI professionals and 1.4 percentage points in STEM talent. This growth placed the country in the top 10 globally in all major talent categories tracked.
Backed by one of the most educated populations in the world and a strong presence in leading international universities, India is well positioned for sustained long-term growth, the report said.
