The information technology (IT) sector has long acted as a social elevator for India’s middle class. If artificial intelligence (AI)-led automation starts hollowing out entry-level roles, how do you see this impacting first-generation white-collar workers who relied on IT as a pathway to upward mobility?
Every year, India produces around eight million graduates overall, with nearly three million engineering graduates—out of which about 1.5 million are considered decent engineers. Till 2020, all of these decent engineers were absorbed into IT services jobs. In the past three years, these 1.5 million jobs per annum have declined to almost zero, which, in turn, means that even the better engineering graduates now have very little demand for their services.
That’s the first layer of challenge in the system. Now, after IT services, another big sector for recruitment was banking. And you are seeing that by the year ending March 2026, even that sector is not creating jobs. Rather, it is shedding jobs.
In that context, banks such as ICICI Bank and HDFC Bank have shed around 6,000 people each in the financial year of 2026. If you aggregate white-collar jobs since 2020, the number of jobs over the last few years has almost come to a complete standstill. There have been very few white-collar jobs in the past three years, and for our 80 lakh graduates every year, there are very few takers for their services.
Now, this is the first dimension of the crisis. Actually, the number of graduates today has gone up from around 50-60 lakh a decade ago to about 80 lakh now. But for these graduates, even the better ones, there is really no demand. You can then look at the next level of the challenge, which applies to those who already have jobs.
So far, I was discussing those who don’t have jobs. Now, let’s come to those who have white-collar jobs. Both the income tax data of the Government of India and our analysis of compensation show that after adjusting for inflation, compensation has shrunk about five per cent per annum over the last decade. Because there is such a surplus, there is so much labour and talent available, those who have jobs are also getting squeezed by their employers.
This trend was visible even before the beginning of AI. AI has only started impacting things recently. Across sectors, not just IT services but also banks and retail, as employers in India and the West deploy more AI, the impact on white-collar jobs will become even more widespread.
At the same time, in sectors like residential real estate, in markets such as Hyderabad and Bengaluru, we are seeing a build-up of inventory. My view is that as AI adoption increases, this pressure will intensify across sectors. Alongside this, there is a social-media effect. Indians spend nearly five hours a day on social media, where they see curated images of wealth and luxury. This has led to two outcomes.
One is taking on more household debts than any other country in the world. Two is more futures and options trading than almost any other country in the world. The losses from futures and options trading, for the third year running, are around $11 billion, or Rs 1.1 lakh crore, roughly the same as the Government of India’s education budget. So, if you look at it together, these are three sets of forces, jobs, wages, and social behaviour, shaping the economy, consumption and the nation’s destiny.
How will AI disrupt life for the middle class?
What we are seeing is the era of service jobs coming to an end. The concept of preparing for a service job ever since you are in primary school is going away. Just like when you go to a factory today, you mostly see robots. Offices are also heading in a similar direction. Much like factories over the last generation, offices are becoming automated, and you hardly see people, you see a large number of machines and automated systems. As a result, the need for employees, human beings and officers is diminishing.
About 100 years ago, office jobs were not as widespread. The creation of the modern office is only about 150 years old. It was a phase of industrialisation where capital equipment was centrally located in buildings. Over time, as the cost of that capital equipment has dropped dramatically, the need for such centralised offices has also reduced. This means the office, as a conventional construct, is slowly fading away. In that context, Prime Minister Narendra Modi encouraging us to work from home makes a lot of sense.
What will be required instead is white-collar work done differently. Increasingly, work will become more task-based and project-based.
What we are seeing is the era of service jobs coming to an end. The concept of preparing for a service job ever since you are in primary school is going away.
With head counts reducing, there will be jobs but it will be very limited? So that way it won’t be like a mass-level hiring.
There will be more new opportunities but fewer jobs. There is already plenty of work, but that work will go to those gig workers who are enterprising. There will be plenty of work for professionals, but it will be more competitive and increasingly gig based.
In our book, we estimate that around 100 million white-collar gig jobs will be created over the next decade. So, there will be a lot of white-collar gig opportunities, but they will go to people who have the enterprise, the drive and the gumption to build their personal brand, through platforms like LinkedIn and YouTube. Ironically, for them, the world will become their market.
For example, if you can write good articles on the economy, you will not be confined to working within one organisation or geography. The world will be your market. Provided you build your brand on platforms like YouTube and others, you will be able to get writing assignments from across the globe.
We are now seeing layoffs at companies across the IT sector, how nearly half of Indian households have some form of personal debt. We are also witnessing salary incomes getting squeezed due to AI. How sustainable is this credit-based consumption?
If oil prices persist at the $100-110 per barrel level, I think over the next year or so the Reserve Bank of India [RBI] will have no choice but to push interest rates upward—both to protect the rupee and to suppress inflation.
Rising interest rates at a time when households are losing jobs in large numbers will add to the stress on middle-class households. I think this will lead to a situation where credit costs increase and pressure builds within the banking system, as both borrowing costs and financial stress rise.
“There have been very few white-collar jobs in the Past three years, and for our 80 lakh graduates every year, there are very few takers for their services.”
Many laid-off IT professionals I’ve spoken to are reluctant to downgrade their lifestyle. They’re increasingly turning to loans, whether from fintech start-ups or banks. In fact, many have even started borrowing in anticipation of being laid off.
Some of the loan growth in the past 12 months has come from people who have been laid off and they have taken personal loans, home loans. They are loaded up with credit so that they can buffer themselves up. But obviously, this is a dangerous strategy. My view is that white-collar, middle-class workers could come under pressure in large numbers, especially if the RBI keeps interest rates high for an extended period.
If this scenario forces the RBI to raise interest rates, how will it impact both borrowers and lenders? Are we looking at a double squeeze, with households hit by higher EMIs and banks facing margin pressure?
For banks, if the RBI hikes rates, two things will happen. One, loan demand should fall off fairly quickly. Two, weaker lenders could be pushed out of business.
As rates rise, bond yields, including corporate bond yields, are already moving up. That, in turn, may allow stronger lenders to improve their net interest margins. Typically, in times of stress, asset quality becomes a serious issue for both strong and weak lenders, especially once the RBI begins tightening.
However, the trigger here is less about jobs and more about external factors like the Iran crisis, which could push up oil prices. Additionally, if consumer demand remains strong, as some commentators are suggesting, that could further drive up food prices and inflation.
How do you see consumption shaping up amid rising layoffs across the IT sector?
In this financial year, the Government of India effectively tried to give a triple boost to consumption. They cut income tax, they reduced GST and they lowered interest rates. I can’t remember any other year in the past 10-15 years when such a triple boost was given to consumption. Earlier, it seemed to work through Diwali and into the early months of the year. Unfortunately, I think the Iran crisis is going to act as a dampener. If that crisis forces the RBI to reverse those 125 basis points of rate cuts from last year, then we will effectively see a rollback of some of that support.
Right now, the trend we are seeing is that household savings are increasingly flowing into the stock market instead of banks. At the same time, we are also seeing a growing reliance on credit-based consumption. We are taking more loans from banks overall, which is increasing. How do you see this?
The RBI data shows that on a net basis, household financial savings have fallen. The last time India saw such low household savings was around 1977, during the Emergency. And this is happening even before the full impact of AI.
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You have mentioned in your book that entrepreneurship, especially enabled by social media, could be a way out. But do you think the Indian middle class is ready for that?
I don’t think we really have a choice. People have stopped having a choice. For generations, our society was structured around creating employees, almost like a system that trained people to become part of a workforce hierarchy. That model, which evolved over the last century, is now beginning to melt away and could disappear over the next decade. The idea of a stable office job for future generations may not hold.
