Last Updated:
Former RBI Governor Raghuram Rajan described AI not as an existential threat but as a catalyst for adjustment
Former RBI Governor Raghuram Rajan (PTI Photo)
Artificial intelligence is increasingly seen as a disruptive force for India’s services economy, especially the software sector, but former RBI Governor Raghuram Rajan has downplayed fears of an outright collapse.
In an interview with Bloomberg Television, Rajan described AI not as an existential threat but as a catalyst for adjustment. Now a professor at the University of Chicago Booth School of Business, he said the broader services story can endure beyond software, even if AI poses challenges. Adoption, he noted, will take time, particularly for firms that are less technology-savvy.
His comments come as India’s IT sector — long the backbone of its services-led growth — begins to experience the early effects of AI adoption. Automation tools are prompting some firms to streamline workforces, particularly in routine coding and customer support roles. However, Rajan argued that the same technology could unlock new demand areas if companies and workers adapt quickly. Reskilling, he stressed, will be critical, but the transition is “not something they cannot overcome.”
India’s prominence as a global back-office and IT outsourcing hub makes it especially exposed to AI-driven automation. A recent note by Citrini Research warning of potential revenue pressure on Indian IT firms contributed to a market selloff earlier this week. Rajan cautioned against alarmism, saying observers often overestimate the speed of frontier innovation while underestimating the slower pace of adoption across the broader economy.
In practice, he argued, many global companies are still far from deploying AI at scale, giving Indian firms time to reposition. Multinational corporations continue to expand global capability centres in India, increasingly shifting higher-value engineering and digital functions to the country. Cost competitiveness remains a structural advantage, with skilled Indian professionals available at a fraction of Western costs, even as both sides access the same AI tools.
Beyond services, Rajan highlighted AI’s expanding role in manufacturing, where advances in robotics are reshaping production processes. He suggested that India’s policy focus should prioritise investment in human capital — education, training and research and development — rather than heavily subsidising semiconductor ambitions without reaching global cutting-edge levels.
Click here to add News18 as your preferred news source on Google.
Follow News18 on Google. Join the fun, play games on News18. Stay updated with all the latest business news, including market trends, stock updates, tax, IPO, banking finance, real estate, savings and investments. To Get in-depth analysis, expert opinions, and real-time updates. Also Download the News18 App to stay updated.
February 27, 2026, 14:56 IST
Read More