India’s labour market faces structural constraints that could prove more consequential than the immediate impact of artificial intelligence (AI) on jobs, said S Krishnan, Secretary, Ministry of Electronics and Information Technology (MeitY) on Saturday at Issac Centre for Public Policy Growth Conference.
A significant constraint highlighted was the limited mobility of labour, driven not merely by skill gaps but by inadequate wage incentives. Workers are often unwilling to relocate, even over short distances, if wages do not sufficiently cover the cost of living, including housing and transport. This indicates that labour market inefficiencies are linked as much to wage structures as to employability.
The observation challenges the prevailing narrative that unemployment is primarily due to lack of skills, pointing instead to weak market signals and compensation mismatches. According to the Adecco India Salary Guide 2026, about 58 per cent of professionals expect salary increases of more than 10 per cent, largely driven by demand for AI, digital technologies, electric vehicles and specialised technical roles.
Overall, salary increments across industries are expected to remain in the 6 to 10 per cent range, indicating a selective, skills-aligned wage cycle. Leadership and management skills emerged as the most critical capability over the next three to five years, cited by 22 per cent of respondents, followed by artificial intelligence and machine learning at 16 per cent and project management at 15 per cent.
Wages Limiting Labour Mobility
According to the 1 finance global outlook report, a four-year Bachelor of Technology (BTech) degree from a mid-range private college in Mumbai costs around Rs 17.3 lakh in tuition fees alone. Including prior schooling expenses, the total educational investment can rise to Rs 34.1 lakh.
The average starting salary for a software developer was estimated at Rs 4.74 lakh per annum, with cost recovery taking more than 20 years after adjusting for inflation and living expenses.
The Unstop Talent report 2026 also highlighted a widening gap between fresher salary expectations and actual offers. While 73 per cent of undergraduate students expect salaries above Rs 5 lakh per annum (LPA), only 40 per cent are able to secure that level. Traditional degree premiums are also narrowing. Around 30 per cent of MBA graduates earn below Rs 10 LPA, while 39 per cent of engineering graduates earn below Rs 7 LPA, indicating compressed salary differences across streams.
Krishnan highlighted that industries often prefer diploma holders or technically trained personnel for shop-floor roles, even as engineering graduates remain underutilised. He also pointed to a skewed educational structure, with significantly more engineering seats compared to polytechnic and Industrial Training Institute capacity, exacerbating the mismatch.
Despite perceptions of workforce surplus, India faces shortages in several critical frontline roles, including policing, healthcare, judiciary and agriculture extension services.
Krishnan pointed out that the country does not have adequate personnel at the cutting edge of service delivery, suggesting that improving productivity in these roles is essential. In this context, AI is being positioned as a tool to augment capacity rather than replace workers.
AI’s Real Opportunity Lies Beyond IT
He further said that while up to 2 million roles, largely in coding and programming, could be affected, the sector could simultaneously generate nearly 4 million new opportunities, particularly in AI-led applications and solutions. Beyond the IT sector, Krishnan emphasised that AI’s most significant impact in India will likely be in the “real economy”—including manufacturing, healthcare, agriculture and micro, small and medium enterprises.
While concerns around AI replacing jobs have intensified globally, Krishnan suggested that the pace and scale of disruption may be overstated. Industry feedback, particularly from the IT sector employing nearly 6 million people, indicates that companies expect adaptation and redeployment rather than large-scale job losses.
He noted that AI can improve productivity and service quality across these sectors, from better diagnostics in healthcare to enhanced efficiency in manufacturing through integration with sensors and Internet of Things technologies. Rather than focusing excessively on concerns around Artificial General intelligence, he stressed the importance of applying AI to everyday economic activities to improve outcomes and service delivery.
The discussion also highlighted the role of manufacturing, particularly electronics, as a key employment generator. Such sectors, he suggested, offer significant potential for job creation, even if they are often viewed as assembly-driven.
However, challenges such as labour mobility, wage competitiveness and working conditions remain critical to sustaining this growth.
Education Reset: Domain Skills Plus AI Literacy
Looking ahead, Krishnan called for a shift in education and skilling strategies, emphasising the need for domain expertise alongside basic AI literacy.
While a small number of specialists will be required at the cutting edge of AI development, the broader workforce must be equipped to use AI tools effectively within their respective fields and to critically evaluate outputs. This, he suggested, requires integrating AI awareness across disciplines rather than limiting it to specialised technical training.
He also called for evolving policy thinking, including the suggestion mentioned in the economic survey to have an AI-focused economic council to guide India’s transition.
Framing AI as a broader technological inflection point, Krishnan described it as an opportunity for India to bridge gaps from previous industrial revolutions. However, realising this potential will depend on addressing underlying structural challenges in the labour market. |
