Key Takeaways
- India’s historic loss of textile competitiveness to mechanized looms offers a cautionary parallel for today’s AI‑driven disruption of its IT‑services sector.
- Prime Minister Narendra Modi’s goal of a developed India by 2047 requires >9 % annual per‑capita income growth, a target now jeopardized as AI agents erode the value of low‑cost coding work.
- Despite billions in taxpayer‑funded incentives, India’s share of global merchandise exports remains under 2 %; Vietnam is outpacing the country in manufacturing.
- Policymakers’ focus on traditional industrial policy is misaligned with the realities of a risk‑averse domestic private sector and precarious public finances.
- A more viable path lies in leveraging the existing R&D presence of multinational tech giants in India, coupling tax incentives with university partnerships to create a home‑grown talent pipeline.
- Upgrading education quality and quantity—especially the 3 million STEM graduates produced yearly—could expand the cutting‑edge talent pool tenfold within a decade, generating the tax base needed for broader development.
- Simultaneously, supporting low‑productivity artisans and small‑scale food processors through scale and capital can raise per‑worker value added from ≈$4 /day to $6‑$8 /day, fostering a broader middle class.
- Without decisive action, India risks being “old before it’s rich,” as nominal per‑capita income growth at the past decade’s 5.5 % rate would leave the nation lagging behind wealthier peers.
Historical Echoes of Disruption
It took India 250 years to catch a break after its textile artisans lost out to new technology in the 18th century. The narrative begins with Hargreaves’ spinning jenny, which “drawing, twisting and winding 16 or more threads at a time, it outproduced the spinners making some of the world’s finest yarn.” Handlooms then yielded to power looms, and the spinning wheel became a symbol of wounded pride that Mahatma Gandhi turned into an emblem of the anti‑colonial struggle. This arc illustrates how technological shocks can overturn long‑standing livelihoods, setting the stage for today’s analogous upheaval in India’s IT‑services sector.
AI’s Threat to the IT‑Services Engine
Technology services form a $250 billion export engine supporting 6 million jobs, yet “autonomous AI agents are already shrinking the value that coders in Bengaluru and Hyderabad bring to global enterprises.” As global firms seek to become their own software companies—replacing legacy systems from IBM, Microsoft, and Oracle that Indian programmers have long maintained—the demand for routine maintenance work is falling. The article warns that the ambition to make India a developed economy by 2047, which required 9 %‑plus growth in per‑capita dollar income, now looks “more daunting than ever” in the face of AI‑driven efficiency.
Youth Frustration and the Education‑Jobs Link
The angry youth who clashed with police in New Delhi this summer were not mounting a Luddite resistance to AI; they were “registering their frustration with the state’s failure to ensure the fairness of university entrance exams.” Their discontent reflects a deeper anxiety: the fraying link between education and good jobs. Dubbed the “cockroach” movement after a perceived put‑down by the Chief Justice, this generation—nearly 400 million strong—sees education as a pathway to prosperity that AI threatens to blunt. If nominal per‑capita dollar income continues growing at the past decade’s 5.5 %, India will be “old before it’s rich,” underscoring the urgency of aligning skill creation with market needs.
Export Performance and the Limits of Industrial Policy
Despite committing billions of dollars in taxpayer‑funded incentives over the past five years, India’s share of global merchandise exports remains under 2 %, while Vietnam pulls ahead in manufacturing. Policymakers remain fixated on industrial policy—using the state to steer investment into favored sectors—but nearly every country now pursues similar strategies, and India’s domestic business class is risk‑averse while public finances are precarious. The article notes that low‑tech assembly, such as iPhone production with imported components, yields wages of 18,000 rupees ($188) a month, comparable to what a chauffeur or household helper earns in Chennai, highlighting the limited upside of such incentives without a move toward higher‑value manufacturing.
Learning in Production: The East Asian Lesson
True advancement requires formal R&D and “learning in production,” a concept emphasized by development economists Ha‑Joon Chang and Antonio Andreoni. This learning unfolds on a shop floor before diffusing to rivals and adjacent industries, powering the East Asian miracle of 1965‑1990. Those governments sustained firms through overproduction and thin profits with low interest rates and competitive exchange rates, protecting the deep learning embedded in firms like SK Hynix. India’s current industrial policy lacks this long‑term strategic intent, and its public purse cannot sustain the costly subsidies needed to replicate that model.
Harnessing Multinational R&D Centers
Instead of attempting to build a full supply chain from a domestically weak private sector, India could rely on the existing R&D centers of global leaders. Firms such as AMD, Intel, Nvidia, and Qualcomm already employ thousands of engineers in India for cutting‑edge research. The proposal: grant them tax breaks for investing in underfunded public universities and allow them to establish advanced testing, simulation, and verification labs across the broader engineering school network. Such collaboration would generate the talent multinationals need while spilling over into a local startup boom whose founders aspire beyond “10‑minute food delivery.”
Data Centers as Knowledge Hubs
A similar logic applies to data centers. “Token factories using local land and power could contribute, say, 5 % of their high‑bandwidth memory chips toward an existing national research cloud, accessible to universities and research centers.” Any scientific breakthroughs stemming from this shared infrastructure could finally motivate domestic firms to invest in genuine R&D. Multinationals already employ 2.4 million professionals in India, generating nearly $100 billion in annual revenue; the policy challenge is to supercharge that sum to $1 trillion by embedding local research directly into the products and services these firms sell worldwide—far more lucrative than merely selling lines of code.
Education as the Cornerstone of Future Prosperity
Young Indians care deeply about fairness in university entrance exams because they recognize that a good education remains a source of power even in the age of AI. Raising both the quantity and quality of the 3 million undergraduate and graduate degrees India awards annually in STEM fields could expand the cutting‑edge talent pool tenfold within a decade. Those R&D professionals, earning globally competitive wages, would furnish the tax resources needed for public employment, urban infrastructure, better‑paid teachers, doctors, and frontline health workers, thereby broadening the middle of India’s employment pyramid where wealth is currently overly concentrated at the top.
Uplifting Low‑Productivity Artisans and Small Enterprises
While nurturing the high‑skill vanguard, India must also pull those stuck in low‑productivity rut into higher‑value work. More than 15 million Indians work as handloom weavers, knitters, and tailors, often in solo establishments, and another 5 million labor in mom‑and‑pop food‑processing operations. Providing these units with modest scale and capital can lift value added per worker from about $4 a day to $6 or even $8. Emulating Taiwan’s approach—building up small businesses first—creates a foundation for higher‑value manufacturing and a more inclusive middle class.
A Historical Parallel and the Path Forward
The article closes with a poignant historical echo: In 1804, Joseph Jacquard’s mechanical loom used punched cards to control complex fabric patterns—those cards contained the seeds of binary code that birthed the modern computer. Between the factory automation that impoverished India’s artisans and the computer revolution that offered a way back, a quarter of a millennium was lost. As Amitav Ghosh wrote in The Circle of Reason: “When the history of the world broke, cotton and cloth were behind it; mechanical man in pursuit of his own destruction. Who knows what new horrors lie in store?” Today, AI represents that new horror, and an overly timid India Inc. has neglected to build the foundational capabilities needed to meet it. Mimicking a smartphone‑ and semiconductor‑focused industrial policy will not create good jobs fast enough; blind capitulation to the West will backfire politically and economically. Instead, collaboration—think different, as Apple’s iconic ad urged—will keep the world’s most populous nation enmeshed in the warp and weft of the global economy, allowing India to spin a new, homespun solution for its future.
https://www.ndtv.com/opinion/indias-gen-z-faces-down-the-artificial-intelligence-future-12143924