IT Jobs Can No Longer Be Seen as a Safe Bet for India's Middle Class. Period.

Infosys layoffs are the first clear warning that AI will eat up IT jobs in India, writes Aunindyo Chakravarty.

Infosys has done what all IT firms will be forced to do.

(Image: Vibhushita Singh/ The Quint)

The dramatic layoffs of nearly 400 trainees at Infosys are the first clear warning that Artificial Intelligence (AI) is going to eat up middle class white-collar jobs in India.

IT services ecosystem provides the largest number of well-paying salaried jobs in India – many of which can now be replaced by the various AI platforms. All a company has to do is to spend $20 (Rs 1,700) per month to replace two freshers who would have been paid Rs 20,000-25,000 each. If they spend $200 (Rs 17,500) per month, they could get access to a PhD-level AI agent – and replace middle-rung techies who earn anywhere between Rs 70,000 and Rs 1 lakh per month.

IT majors have probably known this for the past two years. When ChatGPT came out at the end of 2022, it was a fascinating, awe-inspiring toy for most of us. But for tech companies, it was both an opportunity and a major threat.

Outsourcing to AI?

The threat is immediate for India’s IT companies. Most of their work is to do with automating services for foreign companies, creating custom software for them, digitising their data, and then maintaining their systems.

Now, foreign companies can get a significant part of that work done in-house by AI platforms. Instead of outsourcing to India, they can outsource to ChatGPT.

Emad Mostaque, the controversial Bangladesh-born British founder of Stability AI, was among the first to publicly voice this in July 2023. He predicted that Indian outsourced coders would be among the first to lose their jobs, because AI could do the work better.

Surely, Indian IT majors have been preparing for this to happen. No wonder they have been slowly, and quietly, shedding numbers for the past two years. In fact, 2023-24 was the first time in nearly two decades that the top three IT majors in India – Tata Consultancy Services (TCS), Infosys, and Wipro – reduced their headcount.

They also delayed salary hikes. Infosys, for instance, is expected to hand out increment letters this month after a long delay. The pay hikes will be effective from April. These will be the first raises since November 2023.

What This Means for the Middle Class?

Data collected by the Centre for Monitoring Indian Economy (CMIE) suggest that there are 18-19 million people in India who are employed as white-collar professionals with regular salaries (excluding clerical staff and technicians). The top five IT majors – TCS, Infosys, Wipro, HCL Tech, and Tech Mahindra – alone account for roughly 8 percent of these.

This is why India’s aspirational middle class sends their kids to get computer science degrees. They are willing to spend their lifesavings to fund their children’s IT education, in the hope that the jobs they land will put them on the path to greater prosperity.

No wonder then that there are 1.3 million students enrolled in computer science courses right now. An IT job is not only a guarantee of a comfortable life, but it also opens doors to getting a job abroad, especially in the United States. This door is closing very fast.

Of course, there will be contrary indicators in the short run. Companies across the world need to get their systems AI-ready. So, IT majors in India will probably be able to crack several deals to organise data, train Large Language Models (LLMs), and integrate AI into existing software systems.

But these will not be very lucrative for employees.

The only reason Indian companies will get these deals is because they will do it for much less. And that means even if jobs increase in the IT sector in the coming quarters, pay is likely to be low.

This is obvious from the abysmal starting salaries that big IT companies are offering right now. Computer science graduates from mid-rung colleges are being placed at monthly salaries of Rs 20,000-25,000.

This is more or less what they would have got 10 years ago. In real purchasing power terms, Rs 25,000 in 2015 is the same as Rs 40,000 today. Back then, salary hikes were also higher and more regular. Now, a new IT employee is likely to stagnate at their pay level for much longer.

Lessons for Middle Class Parents?

So, what are the lessons for the middle class from this?

The most important lesson is for middle class parents. They need to stop forcing their kids to do computers even when they don’t want to.

There was a steady flow of IT jobs for over two decades, even for those who were average performers. Now, only the super talented techie will survive. And they too will have to be ready to use AI — and do the work of five others.

This is not just a problem in India. It is true for tech jobs everywhere. In the US, for instance, job postings for software developers have dropped by nearly 35 percent from the pre-COVID period. They are down a whopping 70 percent from the peak reached in 2022. The decline started almost immediately after ChatGPT was made public.

Of course, AI is not only going to affect jobs in tech. It will replace humans in every sector.

Finance will be among the worst-hit. A recent Bloomberg survey predicts 200,000 jobs could be lost on Wall Street over the next few years. A previous Citi survey is even more pessimistic. It predicts that AI will eat up more than half the jobs in banking and finance.

This, again, is bad news for India’s middle class, since the financial sector is the other big provider of white-collar salaried jobs. That is also why finance degrees are among the most sought-after by middle class students. It has been a passport to affluence for three decades.

The impact on the middle class is going to be immense. GenZ will face the brunt of it. For the first time since India became independent, a generation is likely to earn less, in real terms, than their parents.

Young people will stay in their parental home for much longer. They will delay marriages, and if they do get married, they will have fewer children. Mental health will suffer. Frustrations will build up and they will show up in spectacular, and irrational, public outbursts.

Perhaps, out of all this, something saner will emerge.

India’s middle class has spent four decades chasing consumerist dreams. The next generation will have to live with simpler joys of life. Like eating chhole bhature at a dhaba with friends. Or walking in the park. Or simply singing or reading a book.

But we, the middle class, will have to prepare for dark times, before the sun shines again.

(The author was Senior Managing Editor, NDTV India & NDTV Profit. He tweets @Aunindyo2023. This is an opinion piece. The views expressed above are the author’s own. The Quint neither endorses nor is responsible for them.)