AI Automation and Its Impact on the Indian Job Market

Author: Vaibhavi Rai

co-Author: Anshika Bantwan, Yashika Pant, Kumar Nagarjun

Abstract

AI can perform not only routine jobs but can also accomplish tasks that were previously believed to be complex for AI through machine learning. Automation is projected to advance further and dynamically change the employment landscape of India and create new jobs in various sectors. AI presents itself as a better employee as it does not tire, does not take leaves, and has a higher productivity and efficiency output, it leaves human labor vulnerable to job displacement and even unemployment. We find that the informal sector, while benefiting greatly from automation, is at the highest risk of job displacement and is difficult to rehabilitate as they may lack higher skills to have a comparative advantage over automation. The study finds that the Indian workforce, even with a higher education, lacks the essential skill set to compete with AI. 

Methodology: The study uses qualitative, secondary research and peer-reviewed open-access resources. 

Literature Review

AI-driven automation is rapidly transforming labor markets, which has led one to be concerned about job dislocation and the restoration of economic structures. The work by Acemoglu and Restrepo (2018) highlights that AI substitutes human labor and reduces the demand for routine tasks-the displacement effect. Still, countervailing forces in the form of productivity gains, capital accumulation, and the creation of new tasks cushion the effect of automation on the economy. Empirical evidence shows that, on the whole, automation disproportionately affects manufacturing, logistics, and administrative jobs, while simultaneously raising the demand for higher-skilled and AI-complementary roles (Autor and Salomons, 2018). Manyika et al. (2017) estimate that by 2030, 30% of jobs could be automated, although some jobs will be created in the technology and service sectors. The adaptation of the workforce becomes key as job transitions will be hampered by the mismatch in skills. Bughin et al. (2018) focused their attention on reskilling initiatives to deal with such problems. UBI and networks for lifelong learning programs (Brynjolfsson et al., 2020) are one way to mitigate the impact of automation. NITI Aayog’s Responsible AI (2021) report recognizes the threat of AI automation on employment in India.  The report also identifies the threat of worsening social biases, privacy, and algorithmic bias. To tackle these issues, the report emphasizes the principle of fairness, transparency, and accountability while adopting AI and advocates reskilling and the right to privacy. In the end, automation through AI harbors prospects and hazards. The equilibrium of technological growth and policy measures to gain employment transitions visibly promotes or perpetuates the vestiges of global employment.

Keywords: Artificial Intelligence, AI Automation, Employment, Job Creation, Job Displacement, Opportunities, Challenges, Regulatory Recourse, AI Augmentation, Machine Learning, Generative AI.

Introduction

We have improved tremendously due to technological advancement. Humans and machines have had a vital partnership that started with the wheel, revolutionizing travel and agriculture. Innovations such as the screw which enabled amazing construction feats to the assembly of modern machines, the creation of mass communication during the printing press era, or the magnetic compass which warned brave sailors before their voyages, all aided in building the world we live in today.

We have come far from the steam engine that propelled the First Industrial Revolution, overseeing a shift from manual to mechanized labor. Where the Second and Third Industrial Revolutions brought technological and digital revolutions, the Fourth Industrial Revolution is in full swing making waves in artificial intelligence (AI), machine learning (ML), the Internet of Things (IoT), and robotics. In the 1960s, an American animated series called “The Jetsons” imagined several technologies we now consider common. Robotic assistance, smart homes, and video calls are no longer science fiction. AI has entirely changed the human lifestyle and how we work. Automation has taken over mundane and even non-routine tasks— chatbot-driven customer service, mechanized warehousing, and even solving complex problems like analyzing data in real-time to make predictions about market trends, a task once requiring human expertise; all can be performed by AI. As efficient and beneficial as AI is, it poses a risk to human employment. AI is projected to create 69 million new jobs. This change, however, will come at the cost of mass job displacement and even unemployment. By 2030, AI could displace 300 million jobs globally. So far, it has been projected that only 5% of jobs are fully automated, but 60% of employment, even in advanced economies is exposed to significant AI-driven changes.

The debate around AI automation in India is nuanced and nebulous. Automation promises increased productivity, efficiency, and immense innovation in virtually every field imaginable. According to a report by NASSCOM, AI is expected to add four $450-$500 billion to India’s GDP by 2025. With these growth changes, an economic and social fabric of Indian society is to be expected. AI automation will have a massive impact on the job market as India has the highest skill AI skill penetration rate in the world (Stanford AI Index report, 2021). Automation and adoption of AI in India is a double-edged sword, having the potential to positively impact the economy while also exposing its vulnerabilities. Demand for AI jobs is exponential. However, India is standing face-to-face with an enormous issue to fulfill this demand. Issues with skill gaps, reduced employment, low digital exposure, mistrust of technology, complex social drawbacks, privacy and ethical issues, and flimsy regulations are some of the glaring challenges that India faces at the threshold of AI automation.

1. AI and Job Creation: Opportunities in the Indian Job Market

AI has brought forth a new world order with previously unheard-of opportunities. These opportunities are a double-edged sword that can be a boon to some and bane to many. The IMF, 2024 found that AI-heavy regions saw employment declines, while OECD, 2024  highlights digital skills as a buffer against job losses. AI’s impact across industries is varied. It is crucial to strike a balance between AI-driven efficiency and human employment for sustainable job creation in the evolving economy.

• Creation of a New Job Category: As industries continuously drive to adopt AI systems for more efficient results, the need for specialized roles has been greater than ever. The McKinsey Global Institute report Jobs Lost, Jobs Gained, 2017 suggests that by 2030, AI-driven technologies could create up to 133 million new roles globally, even as automation displaces some traditional positions.

• Public Services and Governance: Governments adopting AI in public administration, such as in smart city initiatives, create a specialized role in digital governance, data analysis, and service delivery (Artificial Intelligence Techniques for Smart City Applications, 2020). This change improves transparency and efficiency in public services while generating new public-sector employment opportunities.

• Reviewing the Opportunities: AI drive software, not only helps customizing job discoveries, but also open source AI also helps people to create influential and customized CV and cover letters. By analyzing trends in the labor market, AI can identify equipment skills and suggest re -starting opportunities for targeted apasming or job seekers. This active approach helps the candidates to achieve the skills required for emerging roles. 

• Remote Work and Market Flexibility: AI-managed cooperation equipment, such as Microsoft Teams has promoted distance work possibilities. This flexibility enables companies to tap into a global talent pool and generates employment for workers in geographically diverse fields, thus attracting efficient professionals who may be limited by location. McKinsey, 2017 estimates that distance work has increased productivity by 10%, reducing the cost by about 20% in areas such as consultation, legal and financial services.

• Enhancement in Healthcare Services: AI improves healthcare productivity by 15–20% and is expected to save up to 150 dollars annually by 2030 ( Jobs Lost, Jobs Gained, 2017 ) These benefits demand new roles like health data analysts and telemedicine coordinators. Since hospitals extend AI-competent services to treat more patients, directly contributes to employment growth in both clinical and technical fields.

2. Impact of AI on Traditional Employment in India
   Routine and repetitive work are the most vulnerable to AI automation, suffering massive job displacement and unemployment. With the advent of Generative AI and multi-modal systems, the jobs previously deemed “safe” from automation are showing trends in the displacement of high-skill workers too. Slow but visible shifts are undergoing. Below are some observations of sectoral disruptions. 

2.1 Job Displacement in Routine and Repetitive Work

Job types that engage in repetitive and rule-based activities will be the greatest targets of AI and automation, and this will shift employment perspectives within: 

• • Manufacturing and Assembly- The manufacturing sector that provides work mostly for semi-skilled persons is identified as fastly moving toward robotic automation and has come to include functions of assembly, welding, and packaging. Enhancing competitiveness may well be disadvantageous to semi-skilled workers over others, unable to afford the transition from evolving forms of labor (Vempati, 2016). Also posits that globally, along with its Indian counterpart will compel 14% of the workforce to migrate across occupations by 2030, thus further reinforcing the notion of disruption (MGI 2017).
  • Business Process Outsourcing (BPO) and Customer Service – Employing approximately 1.6 million people (NASSCOM, 2023), the BPO industry is under severe disruption with the advent of AI chatbots, virtual assistants, and Natural Language Processing tools, partly automating customer support functions. According to the PwC report, AI will be able to take care of around 80% of routine customer queries, thus reducing the need for human agents. The International Monetary Fund (2024) argues that, within emerging markets, such as India, AI poses similar exposure risks and opportunities which leads to approx 40% of all jobs could vanish.

• Retail and logistics – The use of automated warehouses, self-service kiosks, and AI-managed supply chains has reduced the need for human involvement in management and logistics, and even some departments in the management are fully based on it. The Journal of Management Research and Analysis indicates that AI is useful in inventory control as well as in delivery scheduling. The rapidly expanding e-commerce market in India enhances this even further. The World Future Global report suggests that by 2025, 15%  of routine physical tasks in logistics will be automated, especially in large cities, making these jobs obsolete. Yet, some reports claim that while few jobs will be eliminated due to automation, others that require a high degree of skill such as maintenance and supervision will be created. Unfortunately, few displaced workers will be able to achieve these required skill levels (E. McGaughey, 2022).

2.2 Disruptions in Cognitive Non-Routine Jobs

• IT and Software Development
  India’s IT sector, which is home to about 5.4 million jobs, is now transforming with the advent of low-code and no-code platforms that are vital in making Software Development easier.  The PwC report (2018) states that there will be a lessening need for entry-level programmers, as automated coding routines will do it on their behalf. Also according to a survey conducted by the Indian Institute of Management-Ahmedabad (IIM-A) (2024), about 68% of IT professionals develop expectations or anticipate that, in the coming five years, their roles will be partially automated. This change, if not observed well, will erode entry-level opportunities for junior developers, thus emphasizing a higher demand for professionals in fields such as AI and Systems Architecture.

• Healthcare

AI-based diagnostics, robotic surgeries, and automated medical transcription are significant and are altering traditional functions in the areas of healthcare. The Chatham House report “Artificial Intelligence for Healthcare: Insights from India” (2020) says that AI systems were able to analyze medical images with the same degree of accuracy as any expert while eliminating consent from the auxiliary staff that would otherwise have been drawn into the pipeline.  Automation has posed a serious threat to the capabilities of support roles and prepares a foundation for a polarized employment market.

• Banking and Finance
  The evolution from AI-empowered fraud detection and robo-advisors to automated loan processing has driven changes in the banking and finance sector. According to RBI and IMF (2024), these technologies improve risk assessment and transaction monitoring, minimizing the need for human analysts on repetitive tasks. According to PwC (2018), by 2025, some 20% of traditional banking jobs will be automated, with robo-advisors taking out entry-level financial advisors. 

3. Challenges of AI in the Indian Workforce
   

• Job Polarization
  AI automation is forecasted to displace 68% of white-collar jobs in India within the next five years, particularly in IT, finance, and customer services. AI is boosting demand and high-skill roles like cyber security, advanced data analytics AI engineers, AI  auditors, and regulatory compliance experts, but it is either reducing or entirely replacing middle and low-skilled jobs.

• Informal sector vulnerability 

In India, 81% of the workforce is dependent on the informal sector. AI automation could benefit the agricultural sector by improving yield, enhancing efficiency, and greater market exposure. Automation will displace millions of small and landless farmers, rural laborers, and marginalized communities. AI-driven platforms offer jobs, but economy workers, lack basic access to worker benefits like minimum wage and job security. This demographic is also the hardest to rehabilitate since they may lack vocational or higher skills. 

• Skill gap and worker mismatch 

Through automation, AI creates jobs for highly skilled workers. However, the workforce, experienced and new, lacks the necessary skills. According to NASSCOM 2022 report only 17% of Indian companies were able to successfully hire AI skilled workers out of the 56% companies that attempted to do so. On top of this, not only 3% of graduates have AI-related skills. While the newly proposed NEP curriculum covers AI, its adoption is not fast enough.

• Digital Divide and Job Access 

AI-driven automation widens India’s digital divide. Rural access to the internet is only 37% compared to 64% in urban spaces. In addition, 95% of AI jobs are concentrated in urban spaces. Lower access to the internet and lack of technical skills put an additional burden on rural inhabitants, women, and marginalized groups further restricting them from accessing AI jobs.

• Hidden Structural Biases 

In India, certain sectors such as waste disposal and sewage would greatly benefit from AI. Manual scavenging is an unfortunate reality in India. Automation in this sector could reduce the burden of caste base job segregation. Technology can be considered neutral, however, the models training them carry social biases. Responsible AI report by Niti Aayog concerns that AI-driven, hiring semi-skilled and skilled jobs, reinforce discrimination of marginalized groups deepening prejudices and further setting us back. 

• Wage inequality

The potential of widening the economic divide is a big downside of AI automation. In a country like India, where the top 10% of Indians have 70% of total national wealth (Oxfam), the bottom 50% only saw a 1% increase in their wealth. AI is set to displace low to mid-wage earning workers Without intervention, the already disparaging wage and wealth inequality further could accelerate the widening of the rich-poor wealth gap. 

• Regulatory and Ethical Challenges 

There are no regulatory frameworks present to oversee AI-driven recruitment. In 2017, the IT sector of India fired around 56,000 workers, exposing the futility of human labor and intellect. There are no laws protecting workers from unfair automation, job losses, AI models, lack of transparency in hiring and decision making and the lack of mandatory audits for AI hiring puts more pressure on an already job-stressed workforce. The government has been slow in regulating AI, but so far, no parameters protect workers from opaque AI-driven recruitment models.

4. Way Forward: Preparing India’s Workforce for AI: Policies, Training, and Ethical AI

AI automation is a significant threat to employment, mainly repetitive and routine jobs like data entry, manufacturing, and customer service. Low-skilled work is most at risk, worsening income inequality and constraining the availability of work. If left unchecked, AI can further consolidate wealth and power in the hands of technology companies, further disenfranchising the already marginalized. To address these issues, regulatory frameworks must safeguard labor rights, ensure ethical AI deployment, and promote equitable economic growth.

4.1 Augmentation and Not Replacement

AI must assist human work instead of replacing humans with AI. Policies should prioritize labor protection and ensure that AI collaborates with human employment. These regulatory measures can restrict AI to simple foundational tasks, ensuring that more complex and meaningful tasks are reserved for humans and safeguarding their role in the workforce. This initiative will help to reduce mass layoffs or unemployment risk with equitable approaches.  

4.2 Reskilling, Ethical AI Deployment, and Sustainable Workforce Transition

AI will bring about entirely new industries within public services, healthcare, education, and research. By promoting entrepreneurship and job creation, these Government-backed AI innovation hubs can enforce ethical regulations. There is a need to encourage oriented training programs towards resurrection to develop the AI-skilled workforce starting with education, vocational training, and continuous commercial development in school. This will ensure a fair transition in the socio-economic context and avoid massive unemployment caused by automation.

While AI can boost productivity, poor management may lead to high job displacement and worsen existing inequalities. In this regard, governments must strengthen comprehensive social protection schemes to support workers displaced due to automation. Unemployment benefits, reskilling funds, and income protection would be included in this list. The companies automating their processes on a large scale must also contribute to retraining workers in the name of corporate social responsibility (CSR). The need of the hour is to help such displaced workers easily move into workplaces shaped by AI in this collaborative effort. Global AI governance should require multinational companies to uphold fair labor practices, invest in workforce reskilling, and ensure the ethical deployment of AI. This will promote equitable treatment of local workers and foster inclusive economic growth across borders.

Capacity building at the regional level forms another area that is critical to sustainable AI growth. In this regard, the government should set up an AI reskilling center to provide continued education and training to many individuals to keep them employable in emerging AI-driven industries. Educational institutions must also infuse AI literacy into their curricula to prepare future generations for AI-oriented careers. Besides, governments should invest in AI-driven industrial sectors in healthcare, education, clean energy, and smart infrastructure to create new job opportunities and balance job losses in traditional industries. Public-private partnerships in these sectors will fuel economic growth while at the same time alleviating job displacement.

International collaboration : 

International AI councils within institutions like the UN, IMF, and WTO must be established to regulate AI development and eliminate economic inequality among nations. Global AI governance should enforce standards and policies for multinational companies to reinvest in fair practices, workforce reskilling, and ethical AI deployment to ensure equitable treatment of local workers. Beyond all this, Advanced economies like the US, the UK, and China could share AI expertise with developing economies through collaborative R&D to integrate the top virtues of AI and ensure inclusive economic growth. This will help ensure inclusive economic growth by harnessing the full potential of AI across nations. Such a uniform approach will ensure that the balance between the economic possibilities of AI and labor rights will guarantee sustainable development, and India is emerging as a global leader in AI implementation. 

5. Conclusion 

India is on the edge of a transformation and ready to lead the automation revolution. Over 71% of firms have invested in workforce training to keep up with the shift of the revolution.  By 2030, one in seven workers might have to pivot to an entirely new career as automation replaces conventional roles in the market. That translates to millions of lives in transition while the nation simultaneously pushes to generate 85 million jobs annually just to maintain employment levels. This shift could infuse $450-500 billion into the Indian economy by 2025 and pave the way for the goal of $1 trillion digital expansion by 2028.

This shift isn’t only about replacing jobs in the market but reshaping the entire employment landscape and frameworks. New sectors could emerge, from AI-powered healthcare to smart city innovations,  creating demand for roles we have not even imagined yet. However, the current skills gap is a major roadblock. 

India’s informal workforce makes up 81% of the labor market- could see new opportunities but many small farmers and daily wage earners risk being left behind without viable alternatives. Even among the educated, only a small percentage are equipped with the necessary expertise to thrive in the new economy. But this is about more than just economics- it’s about people. The wealth divide is already staggering with the richest 10% holding 70% of the country’s wealth while the bottom half barely sees a 1% increase. If left unchecked, automation could widen this gap. Yet, if approached strategically, it could also be a great equalizer. The key lies in large-scale investments like streamlining education to foster curiosity, creating training hubs to upskill workers, and directing funds toward healthcare, clean energy,  and digital literacy. 

Automation is seen to inject $15.7 trillion globally into economies by 2030 and India’s share of that could be a paradigm shift. Apart from chasing economic growth the ethical, social, and psychological implications should be reflected upon. India’s diverse demographic will inevitably feel the impact of this shift making it crucial to examine the effects of automation particularly on marginalized groups in India. The environmental footprint of AI, from mounting e-waste to energy consumption, must be addressed to ensure progress doesn’t come at the cost of the planet. 

6. References

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