AI infrastructure risks pose threat to India’s IT job engine, Economic Survey warns

The Economic Survey 2025–26 has warned that a worst-case global scenario driven by artificial intelligence could trigger a systemic shock with consequences worse than the 2008 global financial crisis, posing a direct threat to India’s IT-led white-collar employment model.

The Survey described the scenario as low-probability but high-impact, assigning it a 10–20% likelihood, and said it could emerge from a convergence of technological overreach, geopolitical escalation and financial stress. It flagged particular vulnerabilities in the AI-heavy infrastructure sector, where business models depend on long-duration capital, narrow customer bases and aggressive execution timelines.

It stated that a correction in this segment, if compounded by geopolitical shocks or trade disruptions, could sharply reduce global liquidity, freeze capital flows and push economies into defensive policy responses. The Survey warned that the resulting macroeconomic fallout could exceed the severity of the 2008 global financial crisis.

For India, the Survey highlighted growing risks to the IT and services workforce, which has long been the backbone of the country’s white-collar job creation. Using the United States Professional, Business and Information Services sector as a proxy, it identified a sharp structural break after December 2022, when generative AI entered the mainstream, showing that GDP growth no longer translated into proportional employment gains.

The Survey noted that while jobs have not disappeared abruptly, the employment response to output growth has flattened, leading to a gradual but persistent drift in labour demand away from roles centred on information retrieval, summarisation and routine cognitive tasks.

It added that this decoupling was not uniform across the economy. A falsification exercise showed that less digitised sectors did not exhibit a similar break between output and employment, indicating that AI-led disruption remains concentrated in technology-driven and white-collar occupations.

The Survey further stated that India’s long-standing model of providing low-cost IT services to global firms is increasingly under strain as AI systems perform many of these functions faster and at lower cost, eroding the country’s traditional competitive advantage. To address these risks, it proposed the creation of an AI Economic Council to guide responsible adoption of artificial intelligence while safeguarding employment outcomes.