2025 AI boom may not exactly be celebration time for Indians
By K Raveendran
As we enter 2025, the accelerating proliferation of artificial intelligence (AI) is poised to reshape the global landscape in ways akin to the transformational impact the internet had in the late 20th century. Within the first few days of the year, AI-driven technology stocks have seen substantial surges, with shares of major tech companies increasing by up to 20 percent.
The financial stakes involved are rapidly growing, with US AI start-ups raising a staggering $97 billion in 2024 alone. Similarly, European counterparts have raised $62 billion, a quarter of which has been directed specifically toward AI ventures. This significant influx of investment signals an AI boom that is not only reshaping the tech landscape but also promises to revolutionize industries across the globe. However, the rapid growth of AI also casts a shadow, particularly for countries like India, where the widespread deployment of automation and AI technology presents both opportunities and serious challenges, especially within the labour market.
AI’s potential to reshape economies and industries is enormous, particularly in areas like automation and data processing. Major tech companies are launching AI products that make these technologies increasingly accessible to everyday consumers, bringing AI assistants and other tools to a wider audience. While this opens up new possibilities, particularly in terms of efficiency, cost savings, and business growth, the implications for workers are far from universally positive. The introduction of automation technologies could drastically change the nature of work, especially in labour-intensive economies such as India’s. With labour-intensive sectors forming a significant part of India’s economy, the rise of AI brings with it the risk of displacing millions of workers across various industries.
India’s manufacturing sector, which is one of the largest employers in the country, faces considerable disruption due to the ongoing AI revolution. The McKinsey Global Institute estimates that up to 60 million workers in India’s manufacturing sector could be displaced by automation by 2030, particularly in areas like textiles and electronics. These are industries where human labour has been traditionally integral to production, and AI systems capable of handling tasks like assembly, quality control, and design may replace the need for a large human workforce. In textiles, for instance, AI and robotics could perform tasks such as fabric cutting and stitching with greater precision and efficiency, leading to fewer jobs in production lines. In electronics, AI systems could take over not only manufacturing processes but also tasks related to testing and system management, making large swathes of the current workforce redundant.
Many of the displaced workers in the manufacturing sector, especially those in low-skilled positions, may not possess the skills required to transition into new roles. Without adequate training and reskilling programmes, these individuals may find themselves left behind in a rapidly changing economy, exacerbating the issue of unemployment and underemployment in the country. The shift toward automation also raises the question of what kinds of new roles will emerge. While some argue that AI will create new job opportunities, especially in fields such as AI development and maintenance, the question remains whether these new roles will be accessible to the displaced workforce, particularly in India’s rural and semi-urban regions, where the bulk of the workforce is concentrated.
The IT and services sectors, long considered the backbone of India’s economic growth, are not immune to the changes brought about by AI either. India has been a global hub for IT outsourcing, with a significant number of its workforce employed in fields such as software development, system testing, and technical support. However, as AI technologies such as automated coding systems, testing tools, and virtual assistants become more advanced, many of the basic IT tasks traditionally performed by Indian workers are being automated. The McKinsey report highlights that the automation of these basic IT functions could result in a significant reduction in entry-level jobs, traditionally a major source of employment for India’s growing middle class. These workers, many of whom rely on IT outsourcing for their livelihoods, may face displacement as AI systems increasingly take over tasks like code generation, bug testing, and routine system maintenance.
The potential for job losses in India’s IT and services sectors underscores the challenges posed by AI. India’s IT workforce, once the envy of the world due to its ability to provide high-quality services at low costs, may find itself facing intense competition from AI-driven systems that can do the same work faster and at a fraction of the cost. As AI becomes increasingly sophisticated, it may soon be capable of performing a broad range of tasks that were once considered too complex to automate. This could lead to large-scale disruptions in the IT sector, particularly among entry-level employees, who may struggle to find new roles in an AI-dominated landscape.
Beyond the formal sectors of manufacturing and IT, India’s vast informal workforce faces even greater risks as AI and automation technologies begin to infiltrate the economy. Approximately 90 percent of India’s workforce is employed in the informal sector, where workers typically lack formal contracts, social security benefits, and access to retraining opportunities. This lack of job security and institutional support means that many informal workers are particularly vulnerable to technological disruptions. Whether working as street vendors, drivers, or in small-scale service jobs, many informal workers lack the safety nets that formal sector employees might have, such as unemployment benefits or severance packages.
As AI technologies increasingly enter the economy, it is likely that informal sector workers will be among the first to feel the effects. For instance, the rise of autonomous vehicles and delivery robots could lead to massive displacement in sectors like transportation and logistics, where a large number of informal workers are employed. Drivers, delivery personnel, and small-scale service providers who rely on their skills for income may find themselves replaced by AI-driven alternatives, with little recourse to support systems. Similarly, jobs in agriculture, construction, and low-skill services may also be vulnerable to automation, particularly in urban areas where businesses are eager to embrace technology that can reduce costs.
The challenges posed by AI proliferation in India are not only economic but also social. The informal workforce, by its very nature, lacks the formalized mechanisms through which workers in the formal sector can access retraining programs or transition to new roles. In India, where access to education and skill development programs is already uneven, workers in informal sectors may find it increasingly difficult to adapt to the demands of an AI-driven economy. Moreover, the lack of a robust social safety net further compounds these challenges, leaving displaced workers to face uncertainty with little financial or institutional support. (IPA Service)