AI Is Dismantling India’s Middle Class, And a Global Investment Firm Just Warned the Prime Minister
For two decades, getting a job in India’s IT sector was the ticket to a better life. It meant buying a home. Sending your kids to a good school. Flying instead of taking a bus. AI is now threatening all of that, and a major global investment firm has written directly to the Prime Minister to say so.
The Letter That Should Make Everyone Pay Attention
On April 23, 2026, global brokerage firm Bernstein published an open letter addressed to Prime Minister Narendra Modi, warning that India could “under-deliver on its potential” if urgent structural reforms are not made in jobs, manufacturing, and innovation.
The timing is deliberate. The message is stark.
India’s IT services and BPO sectors employ an estimated 10 to 15 million people, the backbone of the country’s aspirational middle class. These sectors are now directly exposed to automation risks from generative AI, which is increasingly capable of handling coding, customer support, and back-office functions.
These aren’t abstract statistics. These are the engineers, analysts, and support workers who built India’s consumption boom, buying flats in Bangalore, cars in Pune, holidays in Goa.
The Numbers Are Already Moving
Net hiring by India’s top five IT companies dropped by around 7,000 in the financial year ending March 2026. For the last five years, gross hiring across IT firms averaged around 230,000 annually in the financial year ending March 2026, they added only 170,000.
The shift is clearest at the top. India’s largest IT firm, Tata Consultancy Services, which laid off 12,000 employees last July, plans to hire just 25,000 fresh graduates this year compared to an average of 40,000 over the last three years.
For every engineering student graduating in India right now, that gap is personal.
What AI Is Actually Replacing
India’s IT advantage was always built on affordable, skilled talent. That edge is shrinking fast.
Before AI, India’s relatively low-cost talent pool was a key driver of IT growth. But AI has tilted this equation away from labour arbitrage toward tech arbitrage meaning the value is now in the AI model itself, not the human doing the work.
“FY26 saw a structural reset where companies focused on productivity-led growth rather than large-scale hiring. Headcount growth has flattened, even as revenues remain stable,” one senior IT staffing executive told CNBC.
Where Does Displaced Labour Go?
This is where the story gets complicated, and concerning.
Bernstein also warned that most AI value creation is currently concentrated in the US and China, raising the risk that India becomes primarily a consumer of AI rather than a creator, meaning the economic gains flow out of the country, not into it.
Manufacturing was supposed to be the backup plan. But experts note that more than a decade of “Make in India” policy has not yet triggered a manufacturing renaissance, leaving the economy without a clear alternative engine for quality job creation.
Meanwhile, close to 45% of India’s workforce still depends on agriculture, which contributes only 15–16% of GDP, leaving limited room for displaced IT workers to absorb into other productive sectors.
What the Government Says
India’s IT minister Ashwini Vaishnaw acknowledged that disruption to jobs in the tech sector is a “real challenge,” but stressed that the solution lies in upskilling and reskilling the workforce.
Economists are less optimistic. “Without job creation, India’s consumption-led economy will struggle to grow, limiting investment demand at a time when the export growth-led model is at risk globally,” one leading economist warned.
Bottom line: India is still the world’s fastest-growing large economy. But the jobs engine that built its middle class is stalling, and AI is holding the spanner. The question Bernstein is asking Modi, and the question every Indian family in IT should be asking right now, is simple: what comes next?