Artificial intelligence (AI) will necessitate significant reskilling of employees and a strategic pivot for India's IT companies, but concerns about widespread job losses are unfounded, according to Neelkanth Mishra, Executive Director-Designate at the World Bank and Chief Economist at Axis Bank.
"There is a lot of pivoting, there is a lot of restrategising that all the firms will need to do. But this panic and paranoia about massive job losses is something which I think is at this stage and time," Mishra told reporters on the sidelines of an event organized by the Internet and Mobile Association of India (IAMAI) in Mumbai.
Services Exports Continue to Grow
Mishra highlighted that India's services exports remain robust despite rapid AI advancements. "Even in the month of April, services export growth was 15 per cent in dollar terms. So it is growing faster than GDP," he said.
He noted that AI is transforming the structure of the IT industry, with some work shifting from outsourced service providers to in-house teams. "The organisational boundary itself may be shifting because of AI... when we look at the industry revenue from a macro perspective... you have to combine GCCs and Indian IT," he explained.
Reskilling as a Key Challenge
The primary challenge for IT services companies will be managing this transition through workforce reskilling. "Does that mean that there is no risk going forward? No, there is significant risk... there is a significant amount of transition that all of these IT services companies need to go through in terms of reskilling of people," Mishra said.
According to him, companies are likely to hire more talent in areas such as design, user interface (UI), user experience (UX), and deployment, even as demand for routine coding work changes.
Jevons Paradox in Software Development
Commenting on recent layoffs in some software firms, Mishra said such companies are the first to adjust because software development is their biggest cost. However, he suggested that lower software development costs could increase overall demand for software. "But on the whole, it does seem to me that the Jevons paradox... is actually playing out. As the cost of writing software falls, the amount of software written goes up," he said.
Broader Economic Outlook
On the broader economy, Mishra said lower energy prices are expected to support a recovery in India's growth momentum after a temporary slowdown. "With energy prices now coming down, I expect that the growth momentum that we saw in February should revive in another maybe one or two months... we were growing at 7.5-8 per cent in February and there's no reason why that shouldn't revive in the next two years," he stated.
