For India, AI a ‘stress test’ of state capacity; must align tech adoption with mass employability: CEA Nageswaran | Business News

“Every year we must generate millions of productive dignified jobs or livelihoods; every year of delay compounds pressure, every year of drift narrows our options. If we do not move decisively, such as strengthening foundational education, scaling high-quality skilling, expanding labour intensive service sectors, removing the regulatory bottlenecks that hinder the expansion of labour-intensive services, and if we do not ensure calibrated AI deployment, we will not merely miss an opportunity, we will create unavoidable social and economic instability,” Nageswaran said in a panel discussion on the theme ‘Future of Employability in the Age of AI’.

While experts say that the use of AI can, in the long-term, create new types of employment, thousands of job cuts have been announced in recent times as more and more companies globally integrate AI and its applications in their processes. In an interview to British daily Financial Times last week, Mustafa Suleyman, tech giant Microsoft’s AI Chief Executive Officer, said most, if not all, tasks in white-collar jobs will be automated by AI in the next 18 months or so.

Microsoft itself has announced thousands of layoffs over the last year or so, including around 9,000 in July 2025. Closer home, software major Tata Consultancy Services last year announced that it would let go of more than 12,000 employees as part of a restructuring exercise.

In India, shares of tech and software companies have been pummelled in recent days amid fears that AI tools and bots could hit business orders and profits. Shares of Fractal Analytics – which only debuted on the National Stock Exchange on Monday after its Initial Public Offering (IPO) last week raised more than Rs 2,800 crore – closed 4.4% lower at Rs 837.7. The IPO price of the enterprise AI company’s shares was Rs 900.

On the whole, the sectoral Nifty IT index ended 0.2% higher on Monday, However, over the last week-and-a-half, the index has tanked nearly 6,000 points, or more than 15%, after AI firm Anthropic launched a legal plugin for its chatbot, Claude, which can automate work such as review of contracts.

Monday, Nageswaran referred to the Economic Survey for 2023-24, which said India needs to create at least 8 million jobs every year. Terming this as the scale of “our employment challenge year after year”, the Chief Economic Advisor expressed concern that only a small proportion of India’s workforce has received formal skill training. This, he said, is a “structural vulnerability”.

“If AI displaces faster than we can skill humans and if productivity rises without employment elasticity, if institutional reform lacks technological adoption, we risk squandering our demographic window. We risk widening inequality at precisely the moment of greatest technological change,” he warned.

As such, he called on policymakers, the private sector, and academia to “act now” as it was a question of the future of growth, social stability, and cohesion. According to Nageswaran, the first step is to reform India’s education and pedagogy by imparting foundational skills. “And that is where the path to co-creating prosperity with AI and employability in the age of AI and that is where the path begins”.