AI Doomsday Scenario: Raghuram Rajan Says India Services Sector Will Be Disrupted But Not Derailed

Sudden rise of artificial intelligence has sent shockwaves through the global technology workforce. In India, where the massive IT and services sector is the backbone of the economy, fears of widespread job losses have reached a fever pitch. A recent market note warning about AI-driven revenue compression even triggered a sharp selloff in Indian technology stocks. However, former Reserve Bank of India (RBI) Governor Raghuram Rajan has stepped forward with a much-needed reality check.

In a recent interview, Rajan boldly dismissed the panic, asserting that while AI will inevitably disrupt the Indian software industry, it will not derail the nation's broader services sector.

Speaking to Bloomberg Television, Rajan addressed the growing anxiety that automated AI agents will completely wipe out routine coding, customer support, and back-office jobs. While he acknowledged that the technology poses a legitimate challenge, he urged investors and tech workers to avoid falling for alarmist narratives.

"Let's not get overly wound up in science fiction and think that is the outcome," Rajan stated, actively playing down the worst-case scenarios.

He explained that real-world enterprise adoption is much slower than the headlines suggest. The engineers developing the technology adapt to it instantly, but broader global integration takes significant time. This gap provides Indian software firms with a critical window to reposition themselves and upgrade their service offerings.

Despite the automation wave, India retains its core competitive edge. Rajan highlighted that multinational corporations are actually continuing to expand their Global Capability Centres (GCCs) across India. Instead of leaving, they are aggressively shifting higher-value engineering, research, and digital functions to the subcontinent.

The math remains highly favorable. According to Rajan, a highly skilled consultant in India still costs roughly one-fifth of what a comparable professional charges in the West. When this massive cost advantage is combined with access to identical global AI tools, it effectively levels the playing field, ensuring that the Indian market remains highly attractive to foreign investors.

However, long-term survival requires evolution. Rajan warned that the legacy model of low-end labor arbitrage is permanently changing. Indian IT firms and their massive workforce must immediately prioritize upskilling.

"The Indian services story can still persist in many other areas outside of software," he noted, adding that tech professionals must retool "really fast" to avoid displacement.

As we closely track these massive industrial shifts here at IN4 GRAMS, the consensus is clear: AI is not a job destroyer, but an industry transformer. The companies that successfully pivot their massive talent pools from routine coding toward advanced AI integration and data engineering will thrive.

Raghuram Rajan’s insights offer a grounded perspective amidst the chaotic AI hype. The message for India’s IT sector is straightforward. The transition period will be painful and highly disruptive, but a total doomsday scenario is highly unlikely. By embracing rapid reskilling and leveraging human capital, India's tech industry is perfectly positioned to turn this disruption into its next big growth engine.