Rapid advances in artificial intelligence (AI) are likely to have a long‑term impact on employment for India’s skilled labour force and could alter the country’s IT services‑led growth model, consultancy EY said in the May 2026 edition of its Economy Watch report. The report flagged both the productivity upside from AI and the risks to jobs if workers fail to reskill quickly.
AI to reshape ’employment’ in IT services
EY said the fast evolution of generative AI and automation tools is expected to reshape employment patterns globally and will have particular implications for India, whose services exports are dominated by information technology (IT) and business process management sectors.
“Alongside, the fast‑paced evolution of AI is expected to have a long‑term impact on the employment of India’s skilled labour force, which had, hitherto, found placement in the lucrative job market linked to IT services,” the report said.
Productivity gains and cost pressures
The consultancy noted businesses worldwide are adopting AI to improve productivity and reduce costs, a shift that could displace certain white‑collar roles even as it creates new opportunities. EY described AI as both an innovation engine and a source of disruption: while it can unlock efficiency and higher value offerings, it may also reduce demand for routine tasks that were a mainstay of IT‑enabled services exports.
Reskilling and adaptability as policy priorities
EY warned that the risks from technological disruption will be significant if the workforce cannot adapt to changing skill requirements, and urged policymakers and industry to prioritise re‑skilling and up‑skilling programmes. “The potential risks that technological disruption may pose to employment if workers are unable to adapt quickly to changing skill requirements” should be factored into economic planning, the report said, adding that these developments could influence India’s growth performance both in the short and long run.
Long‑term growth prospects remain strong
Despite the employment risks, EY remained optimistic about India’s long‑term growth trajectory. Citing Organisation for Economic Co-operation and Development (OECD) projections, the report said India is expected to remain one of the world’s fastest‑growing major economies and could become the largest economy in purchasing power parity terms by 2063 under favourable conditions. EY stressed, however, that preserving this trajectory will require proactive policy measures to manage emerging challenges.
Geopolitics, energy and structural change
Beyond AI, EY highlighted other structural and external risks that could divert India from its long‑term growth path, including geopolitical disruptions, energy security concerns and wider technological shifts. The consultancy called for a re‑strategised growth and development strategy that accounts for both short‑term shocks and long‑term structural changes.
Policy implications for India’s growth model
The report suggested that India’s policymakers will need to deploy a mix of interventions- education and training reforms, incentives for high‑value domestic production, support for innovation ecosystems, and social safety nets- to smooth the transition for workers and preserve inclusive growth. Failure to act, EY warned, could see parts of the skilled workforce displaced and could alter the export profile that has powered services‑led growth.
EY’s Economy Watch frames AI as a dual‑edged force for India: it offers substantial productivity and innovation gains but also presents material risks to the employment model that underpinned two decades of services export growth. The consultancy urged early, coordinated policy responses to ensure the country captures AI’s benefits while protecting workers and sustaining long‑term economic momentum.