Gen-AI in India: Jobs Crosswinds, Productivity Tailwinds

Research evidence excerpt

Gen-AI in India: Jobs Crosswinds, Productivity Tailwinds

Goldman Sachs Asia Economics Analyst

Knowledge-intensive services i.e. healthcare, education, media, parts of financial

and professional services look best placed to benefit, while gains in construction and

manufacturing are likely to be limited.

n Sequencing of adoption will matter. The main productivity upside is likely to come

from broad-based deployment across firms. If deployment of labour-augmenting

Gen-AI is prioritized before substitution-intensive deployment, productivity gains

would likely broaden before labour-market disruption becomes more visible.

n Global capability centre (GCC) resilience may cushion substitution risks to

routine business services. In our view, while routine IT-BPS functions face

substitution risk, aggregate tech sector employment (around 2% of non-agricultural

employment), services exports, and GCC expansion remain resilient, as of now. We

find that headcount rationalization has been concentrated in the top 6 IT services

firms (net employment reduction around 64k out of 1.7mn), while the rest of the

technology services sector (including the GCCs) have added around 0.7mn

headcount to reach 4.4mn over the last three years.

Key risks to our baseline view:

n Infrastructure remains a key constraint. India’s Gen-AI diffusion will depend not

just on software capability, but also on compute affordability, data-centre buildout,

reliable power, water availability, and broader digital infrastructure. With India’s

current data-centre capacity of only around 1GW (1% of global data centre

capacity), scaling AI adoption will require substantial investment in both physical

and digital infrastructure.

n Rising protectionism in destination markets for services exports. Beyond the