AI job shock threatens India's economy as IT jobs face automation and real estate slumps

India's Real Estate Will Meet the Reality of Agentic AI

The outsourcing industry, India's largest white-collar employer, is a juggernaut that has all but stopped moving. The dollar revenue at the top five software-services exporters has grown slower than 3% for 10 straight quarters -- a shadow of the double-digit expansion in the previous two decades. As these firms squeeze hiring to survive the existential challenge posed by artificial intelligence, the aftershocks are starting to upend everything from real-estate demand to mortgage-underwriting norms. Last week, Bengaluru-based Infosys Ltd. forecast a much slower pace of increase in sales than analysts had been expecting. At smaller rival HCL Technologies Ltd., revenue for the March quarter declined from the previous three months. After a four-month, $115 billion rout, investors are losing faith in a business model centered on the most-populous nation's army of young engineers, which gave it a wage advantage over developed countries. Outsourcing generated a million middle-class jobs every year; it also drove ancillary employment in real estate, retail, and services, according to Mumbai-based Marcellus Investment Managers. But in the past 36 months, the top five firms have shed a net 85,000 employees. Last year it was uncertainty about US tariffs that led clients to pause tech upgrades. This year, it's the war in Iran. However, the more durable threat is from models like Claude and Mythos. They fix bugs and write code at a fraction of human cost. Cities like Hyderabad, Pune and Bengaluru, where knowledge workers account for a significant share of homebuyers, are witnessing sluggish sales and rising inventories of unsold apartments. Investors who bought under-construction properties -- hoping to rent them to software engineers -- are finding few takers. Even global tech heavyweights would rather invest in high-end chips and data centers than programmers. Thousands of Oracle Corp.'s India employees lost their jobs last month. Banks are paying attention. After all, their credit portfolios are exposed to stagnating salaries and outright job losses in a customer group that they treated as low-risk until now for mortgages and credit cards. The economics research team at Canara Bank, a Bengaluru-based, state-owned lender has come up with some interesting proposals: For borrowers who are susceptible to automation risk, mandate a lower loan-to-value ratio -- for example, 60% versus the standard 80% -- to create a larger equity buffer. For corporate lending, include intellectual property or proprietary data as supplementary collateral. This ensures the bank has a claim on the AI technology that replaced the labor. Finally, require corporate borrowers undergoing AI-led restructuring to divert a percentage of labor cost savings into a debt-service reserve account. Top executives at software companies are still sticking to their sanguine view that steadily increasing AI adoption will mean more work for them, not less. As AI agents get more powerful and affordable, clients will deploy them aggressively to cut costs. They will rely on their trusted outsourcing firms to automate more of their processes. While it's a reasonable thesis, there is nothing here to support the Indian industry's historic pace of job creation. Yes, cleaning up data scattered around an organization, giving it a proper structure, and putting it in the cloud is labor-intensive work. But it's a one-time effort. Once the plumbing is fixed, AI agents will take over. Even for longer-term projects, clients won't pay the same rates as before. A supplier managing software quality with 2,000 employees will soon be expected to do it with 500 -- and AI. As the cost of artificial intelligence plummets toward the price of electricity, contract values for outsourcing will deflate. Investors agree. On the eve of its quarterly earnings, Infosys announcedBloomberg Terminal that it had entered into a collaboration to combine OpenAI's technology with its own agentic service. Yet the market chose to focus on its weak revenue guidance. The stock fell nearly 7% Friday. To protect margins, the $315 billion Indian information technology industry will have to shrink its 6-million-strong workforce. Firms will be better off returning cash via buybacks while other sectors take up the slack in the labor market and stake a claim on a bigger share of bank loans. In a survey of hiring intentions across 20 cities conducted before the Iran war, 78% of employers in healthcare and pharmaceuticals, and 70% of firms in manufacturing, engineering and infrastructure said they wanted to expand their payrolls between April and September, the first half of India's financial year. By contrast, only 38% of IT firms, and 32% of business process outsourcing units -- call centers -- want to bulk up. The shift away from AI-exposed employment is unmistakable. As other models match or surpass Mythos's capabilities in autonomous coding, expect more banks to reassess their lending preferences. Nurses, mechanics, and technicians will have higher job security; they may also enjoy faster wage growth. It stands to reason that they should also command better housing choices and more relaxed underwriting norms. More From Bloomberg Opinion: * Why Tokyo Is Built for the AI Era: Catherine Thorbecke * ChatGPT and Claude? The Real AI Action Is Elsewhere: Parmy Olson * Is a College Education Still Worth It in India?: Andy Mukherjee Want more Bloomberg Opinion? OPIN <GO>. Or you can subscribe to our daily newsletter.

AI job shock risks throttling India's consumption

MUMBAI, April 30 (Reuters Breakingviews) - The jobs crisis stirring in India's vast outsourcing industry spells trouble for the country's $4 trillion consumption-led economy. With the gap between household income and spending already widening, the consequences of the churn on finance and markets will be far-reaching. White collar jobs are starting to disappear in the world's services capital where many global firms employ thousands of staff in global capability centres that are responsible for everything from back-office functions to fraud detection to critical research and development. Following the launch of artificial intelligence tools by Anthropic and others that allow companies do the same amount of work with fewer people, Oracle (ORCL.N), opens new tab laid off 10,000, opens new tab workers, or one-fifth of its India workforce in March, and Amazon.com (AMZN.O), opens new tab let go of 500 people in the country in January, the Economic Times reported, citing sources. It looks like just the beginning of the headcount reductions. One executive of a global bank told Reuters Breakingviews their workforce in India could shrink by one-third. This could happen quickly within just one or two years because of the double digit attrition rates at offices of global firms in cities including Bengaluru, Gurugram and Pune. JPMorgan Chase (JPM.N), opens new tab has a whopping 55,000 employees in the country, which equals about one-fifth of its total workforce and includes one-third, opens new tab of all its technologists; HSBC's (HSBA.L), opens new tab 47,000 local employees make up 23% of its global headcount. Then there is also "AI deflation" - the term Indian IT firms that typically lap up fresh graduates use to refer to slowing revenue growth. Annual revenue in U.S. dollar terms at industry leader Tata Consultancy Services (TCS.NS), opens new tab shrunk for the year ended March 2026, marking the first decline since the $97 billion company's initial public offering in 2004. Altogether, global capability centres ⁠and the IT sector employ up to 15 million people who anchor India's middle class and whose jobs are under threat from generative AI, Bernstein analysts Venugopal Garre and Nikhil Arela said last week in an open letter to Prime Minister Narendra Modi. Though this is a small fraction of India's 616-million, opens new tab-strong workforce comprised mostly of swathes of informal and agricultural workers, the AI vulnerable cohort represents a sizeable chunk of the employed within the rising middle class. With fewer jobs, there will also be pressure on salaries for those who keep theirs. For India, advances in generative AI are intensifying the intractable challenge of creating enough jobs in a country that skipped over the traditional manufacturing route and where 8 million people enter the workforce each year. Modi's push to drive manufacturing isn't softening the blow much either, thanks to factory automation. There are already signs that India's world-beating 7.8% growth is decoupling from employment generation: New Delhi's latest Economic Survey notes that since 2022 - the same year that OpenAI launched ChatGPT -- the labour intensity of output has marginally declined. That rupture will deepen unless workers upskill, the survey says, with the change coming "not in a single shock, but in a quiet, steady drift". This threatens a blow to spending on what people want, rather than what they need. Private consumption accounts for about 60% of GDP and the top 140 million Indians who on average each earn roughly $15,000 per annum, according to Blume Ventures, drive two-thirds, opens new tab of discretionary spending. Any contraction in their incomes could force them to cut back, hitting sales of goods from new homes to cars and demand for experiences from dining out to live events. There will be a ripple effect too: ⁠Middle-class homes in India employ cooks, cleaners and drivers. Demand for their services, and those of India's vast gig economy servicing the middle class, would recede. That puts at risk earnings of carmakers, consumer groups and financial services providers which, together with Mukesh Ambani's Reliance Industries (RELI.NS), opens new tab - the owner of India's largest retailer - account for nearly 62%, opens new tab of the benchmark Nifty 50 index (.NSEI), opens new tab. Sluggish consumption is already hurting some of them: small car sales slowed at Maruti Suzuki India (MRTI.NS), opens new tab last year and Unilever's (ULVR.L), opens new tab Indian unit has been grappling with weak urban demand. A potential 30% reduction in the 15-million-strong outsourcing and global capability centre workforce over the next two years could shrink the top consuming class by about 5 million to 135 million. Assuming Blume Ventures' annual income estimate of $15,000, this cohort's total spending power stands to fall by roughly $75 billion a year, assuming those people don't find other employment or sources of income. That's equivalent to 10% ⁠of the Nifty 50 constituents' net sales, opens new tab of 71.3 trillion rupees ($755 billion) for the financial year ended March 2025, per data from the National Stock Exchange. Overall household savings are already declining as indebtedness mounts: Indians saved barely 23% of their personal disposable income in the financial year to March 2025, according to an estimate by CLSA, down from nearly 30% two decades earlier. Debt as a share of disposable income surged to 55% from 31% over the same period. While India's household debt to GDP ratio is much lower than for most peer economies, meagre earnings mean Indians end up spending 13% of their income ⁠on repaying borrowings, higher than 8.5% for China and 8% for the US. Much of what Indians borrow goes towards financing consumption rather than creating assets. Households are leveraging up to pay for everything from overseas vacations to weddings and smartphone purchases. Such financing, which the Reserve Bank of India calls non-housing retail loans, makes up 55%, opens new tab of household obligations and is growing faster than mortgages. India's household debt to GDP ratio stands at 41.9%, opens new tab. If half of those borrowings are consumption-linked, it implies household discretionary debt amounts to roughly 21% of GDP. Apply that to India's ⁠nominal GDP of 331 trillion rupees for 2024-25 and you have at risk loans worth 69 trillion rupees across the country's banks and non-bank lenders. This threatens the loan quality at financial institutions led by the $130 billion HDFC Bank (HDBK.NS), opens new tab as well as lenders backed by global investors from Sumitomo Mitsui Financial (8316.T), opens new tab to Blackstone (BX.N), opens new tab who are accelerating their expansion in India to tap retail credit demand. The impact of AI on the global workforce may ultimately create more jobs. First, though, it may turn India's already weak consumption and much-vaunted demographic dividend into a nightmare. Follow Shritama Bose on LinkedIn, opens new tab and X, opens new tab. Editing by Una Galani; Production by Aditya Srivastav * Suggested Topics: * Breakingviews * Refining * ADAS, AV & Safety * Software-Defined Vehicle * Financial Results Breakingviews Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time. Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on X @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors. Shritama Bose Thomson Reuters Shritama Bose, India columnist, joined Breakingviews in November 2022. She covers the financial sector and related topics from Mumbai. She was earlier a reporter at Financial Express, a top business daily newspaper, tracking the Reserve Bank of India, lenders and fintech companies. She has a bachelor's degree in English Literature and a postgraduate diploma in journalism.

Inside India newsletter: AI is exposing cracks in India's growth story as it hits high-paying IT jobs

Over the past two decades, India's IT sector has been driving a consumption boom that has in many ways anchored the India growth story. But as AI forces IT companies to shift away from volume hiring, it exposes a critical gap that risks hampering economic growth: a lack of quality jobs. Few global events have dented India's fabled growth story. Even as the conflict in the Middle East disrupts global supply chains, the IMF earlier this month reaffirmed its forecast that India will remain the fastest-growing large economy in 2026. But last week, global equity research firm Bernstein wrote an open letter to Indian Prime Minister Narendra Modi, warning of a deepening employment crisis in the country, especially as artificial intelligence threatens quality jobs in the information technology sector. Those jobs with relatively high wages and productivity have had spillover effects across real estate, education, and services, making white-collar employment a key pillar of the country's economic growth. For the past two decades, 10 million to 15 million Indians working in IT services and the business process outsourcing industry have anchored the "aspirational middle class -- buying homes, taking flights, driving consumption," Bernstein said. "Gen AI now challenges that template." India's IT sector used to outcompete global peers as the vast talent pool at relatively low cost gave it an edge, experts said. But AI has tilted this equation in favor of tech arbitrage, from labor arbitrage earlier. The lack of quality jobs will stress-test the India growth story, which relies on the demographic dividend and domestic consumption. "Without job creation, India's consumption-led economy will struggle to grow, limiting investment demand at a time when the export growth-led model is at risk globally," Shumita Sharma Deveshwar, chief India economist at GlobalData TS Lombard, told CNBC. "India has struggled to raise the share of manufacturing in the economy to shift labour from farm to factories," she said, adding that the AI boom now poses a threat to jobs in both manufacturing and services. Close to 45% of India's workforce continues to depend on agriculture, which only contributes 15%-16% of its GDP, according to Bernstein.

India's Real Estate Will Meet the Reality of Agentic AI: Andy Mukherjee

India's IT slowdown, driven by AI-driven automation and shrinking outsourcing demand, is beginning to hit real estate, mortgages, and employment in tech-heavy cities. With firms like Infosys Ltd. and HCL Technologies Ltd. tightening hiring, banks are rethinking underwriting norms as job risks rise. The outsourcing industry, India's largest white-collar employer, is a juggernaut that has all but stopped moving. The dollar revenue at the top five software-services exporters has grown slower than 3% for 10 straight quarters -- a shadow of the double-digit expansion in the previous two decades. As these firms squeeze hiring to survive the existential challenge posed by artificial intelligence, the aftershocks are starting to upend everything from real-estate demand to mortgage-underwriting norms. Last week, Bengaluru-based Infosys Ltd. forecast a much slower pace of increase in sales than analysts had been expecting. At smaller rival HCL Technologies Ltd., revenue for the March quarter declined from the previous three months. After a four-month, $115 billion rout, investors are losing faith in a business model centred on the most populous nation's army of young engineers, which gave it a wage advantage over developed countries. Outsourcing generated a million middle-class jobs every year; it also drove ancillary employment in real estate, retail, and services, according to Mumbai-based Marcellus Investment Managers. But in the past 36 months, the top five firms have shed a net 85,000 employees. Last year it was uncertainty about US tariffs that led clients to pause tech upgrades. This year, it's the war in Iran. However, the more durable threat is from models like Claude and Mythos. They fix bugs and write code at a fraction of human cost. Cities like Hyderabad, Pune and Bengaluru, where knowledge workers account for a significant share of homebuyers, are witnessing sluggish sales and rising inventories of unsold apartments. Investors who bought under-construction properties -- hoping to rent them to software engineers -- are finding few takers. Even global tech heavyweights would rather invest in high-end chips and data centers than programmers. Thousands of Oracle Corp.'s India employees lost their jobs last month. Banks are paying attention. After all, their credit portfolios are exposed to stagnating salaries and outright job losses in a customer group that they treated as low-risk until now for mortgages and credit cards. The economics research team at Canara Bank, a Bengaluru-based, state-owned lender, has come up with some interesting proposals: For borrowers who are susceptible to automation risk, mandate a lower loan-to-value ratio -- for example, 60% versus the standard 80% -- to create a larger equity buffer. For corporate lending, include intellectual property or proprietary data as supplementary collateral. This ensures the bank has a claim on the AI technology that replaced the labour. Finally, require corporate borrowers undergoing AI-led restructuring to divert a percentage of labour cost savings into a debt-service reserve account. Top executives at software companies are still sticking to their sanguine view that steadily increasing AI adoption will mean more work for them, not less. As AI agents get more powerful and affordable, clients will deploy them aggressively to cut costs. They will rely on their trusted outsourcing firms to automate more of their processes. While it's a reasonable thesis, there is nothing here to support the Indian industry's historic pace of job creation. Yes, cleaning up data scattered around an organisation, giving it a proper structure, and putting it in the cloud is labour-intensive work. But it's a one-time effort. Once the plumbing is fixed, AI agents will take over. Even for longer-term projects, clients won't pay the same rates as before. A supplier managing software quality with 2,000 employees will soon be expected to do it with 500 -- and AI. As the cost of artificial intelligence plummets toward the price of electricity, contract values for outsourcing will deflate. Investors agree. On the eve of its quarterly earnings, Infosys announced that it had entered into a collaboration to combine OpenAI's technology with its own agentic service. Yet the market chose to focus on its weak revenue guidance. The stock fell nearly 7% Friday. To protect margins, the $315 billion Indian information technology industry will have to shrink its 6-million-strong workforce. Firms will be better off returning cash via buybacks while other sectors take up the slack in the labour market and stake a claim on a bigger share of bank loans. In a survey of hiring intentions across 20 cities conducted before the Iran war, 78% of employers in healthcare and pharmaceuticals, and 70% of firms in manufacturing, engineering and infrastructure said they wanted to expand their payrolls between April and September, the first half of India's financial year. By contrast, only 38% of IT firms, and 32% of business process outsourcing units -- call centres -- want to bulk up. The shift away from AI-exposed employment is unmistakable. As other models match or surpass Mythos's capabilities in autonomous coding, expect more banks to reassess their lending preferences. Nurses, mechanics, and technicians will have higher job security; they may also enjoy faster wage growth. It stands to reason that they should also command better housing choices and more relaxed underwriting norms. (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)