IT slowdown threatens urban employment base Live Events You Might Also Like: Domestic consumption expected to cushion India’s growth slowdown in H2: SBICAPS AI revolution: Boosting productivity but threatening jobs Global services trade a silver lining You Might Also Like: China vows to raise household consumption ‘significantly’ Private sector must step up R&D and reskilling Rising household debt adds to economic risk Export squeeze adds pressure on jobs Key takeaway as a Reliable and Trusted News Source Addas a Reliable and Trusted News Source Add Now! (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel As artificial intelligence (AI) disrupts job markets worldwide, India’s IT sector — the backbone of its urban economy — is showing visible stress. According to Rajani Sinha, Chief Economist at CareEdge Group, the slowdown in IT hiring and wages poses a growing risk to India’s consumption-driven growth model.
Sinha told ET Now that India’s IT industry, once a major job creator, is now witnessing flat headcount growth and slower wage increases. “Employee costs for IT companies grew only 5% in FY25 compared to an average of 15% during FY19–FY23,” she noted, adding that both lower hiring and subdued salary growth are contributing factors.
The Indian IT sector employs millions in urban centers like Bengaluru, Hyderabad, and Pune — making it central to household income and consumption patterns. “The IT sector’s stagnation has a domino effect,” Sinha said.
“When wage growth falters, it impacts consumer spending, sentiment, and overall economic momentum. ”Globally, too, job losses in tech and the rise of AI-led automation have sparked fears of an employment squeeze that could extend to emerging economies such as India.
While Sinha acknowledged that AI can enhance productivity, she warned that it may also displace labour-intensive roles — particularly in countries like India where large segments of the workforce remain dependent on service exports. “AI transformation is happening rapidly. India must prepare for it through reskilling and R&D investments,” she said.
Despite global uncertainty, Sinha pointed out that services exports have remained resilient, even as goods trade weakens. “India’s 4% share in global services exports gives us a cushion,” she said.
“But if global tech spending slows, it will inevitably affect India’s IT-driven income and consumption story. ”Sinha emphasized the need for Indian corporates to increase R&D spending and accelerate employee reskilling to stay competitive in an AI-first world. “Government initiatives on skilling are ongoing, but private sector participation remains low,” she said.
“Without innovation, India risks losing its edge in IT and ITeS. ”Sinha also warned that while household income growth is slowing, borrowing levels are rising — a worrying combination that could dent financial stability.
“Households are leveraging more to sustain spending,” she said. “If income uncertainty persists, it could amplify financial stress and weaken consumer confidence.
”The RBI’s latest consumer sentiment survey still shows pessimism among households, underscoring the fragile mood across urban India. India’s labour-intensive export sectors — including textiles, leather, and gems & jewellery — are also under strain from higher U.
S. tariffs and global trade headwinds.
“These sectors employ millions. If exports contract, it will further worsen the employment outlook,” Sinha cautioned.
India’s AI future, while promising, could exacerbate job stress and income inequality unless industry and government act swiftly to reskill workers and invest in innovation. “Productivity gains alone won’t sustain growth,” Sinha concluded.
“What matters now is ensuring that India’s workforce evolves with the technology revolution. ”.