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Informist, Monday, May 18, 2026

 

NEW DELHI – The rapid advances in automation and artificial intelligence are likely to increase the uncertainty in India's labour market, given its large and growing working-age population and the high number of new entrants who are expected to join the labour force over the medium term, Moody's Ratings said in a release Monday.

 

Compared to India, countries such as China, Indonesia, the US, and Brazil have a much smaller proportion of their population between the ages of 15 and 24. "If AI adoption disproportionately reduces demand for entry and mid-level roles--especially in the services segment, which accounts for nearly 60% of urban employment and a significant share of discretionary consumption--employment uncertainty among first-time job seekers could rise, amplifying risks to consumption growth," Moody's Ratings said.

 

The rating agency noted that Indian information technology companies such as Tata Consultancy Services Ltd. and Infosys Ltd. are "strategically" adjusting the composition of their workforces and boosting their automation initiatives to lower costs. These efforts may temper growth in wages of employees and disproportionately reduce employment opportunities for people at entry and mid-career levels, Moody's Ratings said.

 

This, in turn, is expected to weigh on growth in household income in India and affect consumer sentiment over the next 12-18 months. "Even in the absence of a sharp rise in headline unemployment, slower wage progression, reduced job security and delayed hiring are likely to encourage precautionary savings and defer discretionary spending," it said, adding that consumption-oriented sectors such as automobiles, retail, consumer durables, hospitality, and travel are at risk.

 

Policymakers have to ensure sustained employment generation in manufacturing, infrastructure, and allied industries to offset weaker hiring in the services industry and absorb workers who will be potentially displaced by automation. "Ongoing policy measures by the government, such as free trade agreements with New Zealand and the UK and conclusion of trade negotiations with the EU, that encourage manufacturing investment, strengthen supply-chain integration and expand participation in global value chains will be crucial for broadening the employment base and managing sector-specific labor market risks," Moody's Ratings said.  End

 

Reported by Anand JC

Edited by Rajeev Pai

 

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