AI Doomsday? Raghuram Rajan Says India’s Services Sector Will Be Disrupted, Not Derailed

Former Reserve Bank of India Governor Raghuram Rajan has weighed in on the growing concern that artificial intelligence (AI) could severely damage India’s services-driven economy — particularly its software and IT sectors. But he strongly disagrees with the idea of an AI doomsday where jobs vanish and the industry collapses. Instead, he says the economy will adjust and evolve, not be destroyed.

AI Is a Disruptor — Not an Apocalypse

Mr Rajan told Bloomberg Television that it is true AI will shake up India’s services landscape, especially software and routine job roles. With companies increasingly using automation and advanced tools, tasks that were once done by entry-level workers — such as basic coding or repetitive support work — are being transformed. Some firms have already cut staff as they adopt these technologies.

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However, Rajan emphasised that this is not the end of the services sector. He stressed that fear-based “doomsday” predictions exaggerate reality. He said changes take time, and many companies — especially outside cutting-edge technology — are far from adopting AI at full scale right now. This slower pace of real-world implementation gives firms and workers breathing space to adapt.

India Still Has Strengths That Matter

According to Rajan, India’s services model still has important strengths that can help it weather AI disruption:

• Diverse services beyond software: The country’s services economy is broad; not all segments are equally exposed to AI risk.
• Cost advantage: India remains competitive because skilled workers here cost considerably less than their Western counterparts. This pricing edge can make Indian services attractive, even as technologies change.
• Global opportunities: Many multinational companies continue to expand their operations and research centres in India, shifting more complex technology and engineering work to the country.

These elements, Rajan suggests, could help offset some of the pressure on traditional roles. The transition might also open up new jobs and business areas as companies reshape how they use humans and machines together.

Retraining and Skill Upgradation Are Key

One of Rajan’s main points is that India’s workforce must reskill quickly. As AI changes job profiles, workers will need to update their skills and learn new tools to stay relevant. Rajan says this shift, while challenging, is not something people cannot overcome.

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He warned against being swept up in “science fiction” fears and suggested that policymakers, educators, and businesses should focus on education, training, and future-ready skills rather than panic about job losses.