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India bets AI will create enough new opportunities to

offset job

losses

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AI tools supplant jobs built on routine tasks in call

centers,

customer service

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IT training centers shift focus to AI skills amid rising

demand

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LimeChat says AI agents enable firms to cut headcount in

customer-service roles

By Munsif Vengattil and Aditya Kalra

BENGALURU, Oct 15 (Reuters) - At a startup office in

this Indian city, developers are fine-tuning

artificial-intelligence chatbots that talk and message like

humans.

The company, LimeChat, has an audacious goal: to make

customer-service jobs almost obsolete. It says its generative AI

agents enable clients to slash by 80% the number of workers

needed to handle 10,000 monthly queries.

"Once you hire a LimeChat agent, you never have to hire

again," Nikhil Gupta, its 28-year-old co-founder, told Reuters.

Cheap labor and English proficiency helped make India the

world's back office - sometimes at the expense of workers

elsewhere. Now, AI-powered systems are subsuming jobs done by

headset-wearing graduates in technical support, customer care

and data management, sparking a scramble to adapt, a Reuters

examination found.

That's driving business for AI startups that help companies

slash staffing costs and scale operations - even though many

consumers still prefer to deal with a person.

This account of the disruptive changes transforming India's

$283 billion IT sector is based on interviews with 30 people,

including industry executives, recruiters, workers and current

and former government officials. Reuters also visited two AI

startups and tested voice and text chatbots that handle

increasingly sophisticated customer interactions in human-like

ways.

Rather than pump the brakes as the technology threatens jobs

built on routine tasks, the country is accelerating, wagering

that a let-it-rip approach will create enough new opportunities

to absorb those displaced, Reuters found. The outcome of India's

gamble carries weight far beyond its borders - a test case for

whether embracing AI-driven disruption can elevate a developing

economy or render it a cautionary tale.

The global conversational AI market is growing 24% a year

and should reach $41 billion by 2030, consultancy Grand View

Research estimates.

India - which relies on IT for 7.5% of its GDP - is leaning

in. In a February speech, Prime Minister Narendra Modi said

"work does not disappear due to technology. Its nature changes

and new types of jobs are created."

Not everyone shares Modi's confidence in India's

preparedness. Santosh Mehrotra, a former Indian official and

visiting professor at the University of Bath's Centre for

Development Studies, criticized the government for a lack of

urgency in assessing AI's effects on India's young workforce.

"There's no gameplan," he said.

Business process management employs 1.65 million workers in

call centers, payroll, and data handling in India. Hiring has

plummeted due to increased automation and digitalization,

despite rising demand for AI coordinators and process analysts,

said Neeti Sharma, CEO of staffing firm TeamLease Digital.

Net headcount in the segment, which represents one-fifth of

IT output, grew by fewer than 17,000 workers in each of the past

two years, down from 130,000 in 2022-2023 and 177,000 in

2021-2022, TeamLease Digital figures show.

Reuters spoke to three current and five former

customer-service workers, who described increasing job

insecurity and integration of AI, including tools that suggest

responses and bots that handle nearly all routine queries

autonomously.

Megha S., 32, was earning $10,000 a year at a Bengaluru-based

software solutions provider. She said she was laid off last

month, just before India's festive season, as the company moved

to implement AI tools to review the quality of sales calls.

"I was told I am the first one who has been replaced by AI,"

said Megha, who spoke on the condition that her full name and

former employer not be identified. "I've not told my parents."

Sumita Dawra, a former labor ministry secretary who oversaw

an Indian government taskforce on AI's impact on the workforce

before retiring in March, said while the technology offered

productivity gains that would lead to new jobs, India could

consider stronger social security measures, such as unemployment

benefits, to help those displaced during the transition.

However, a senior Indian official told Reuters the

government believed AI would ultimately have little impact on

overall employment. India's IT and labor ministries, and Modi's

office, didn't respond to requests for comment.

AUTOMATION GOLD RUSH

Besides AI, factors clouding the outlook for India's IT sector

include U.S. tariffs; a proposal by a U.S. lawmaker for a 25%

tax on firms using foreign outsourcing services; and President

Trump's $100,000 fee on new H-1B visas, which are widely used by

tech firms to sponsor Indian workers.

Investment bank Jefferies predicted in September that

India's call centers would face a revenue hit of 50% - and

around 35% for other back-office functions - from AI adoption

over the next five years.

That would spell near-term job losses in India, which

accounts for 52% of the global outsourcing market.

"The biggest impact is going to be on young students coming

out of college," said Pramod Bhasin, who in the 1990s

established India's first call center with 18 employees for GE

Capital, where workstations were partitioned by saris strung

from the ceiling.

In the longer run, India could transition from "back office"

to the world's "AI factory" by capitalizing on demand for AI

engineers and automation deployment, said Bhasin, who went on to

found IT services firm Genpact.

One beneficiary of that demand is LimeChat, which Reuters

visited in August. Gupta, the co-founder, said his developers

and engineers have helped automate 5,000 jobs across India. The

company's bots handle 70% of customer complaints for its

clients, and it plans to achieve 90-95% within a year, he said.

"If you're giving us 100,000 rupees per month, you are

automating the job of at least 15 agents," said Gupta. At that

price - about $1,130 - the service costs roughly the same as

three customer-care staff, he said.

LimeChat's sales soared to $1.5 million in 2024 from $79,000

two years earlier, regulatory disclosures show. Last year, the

firm began integrating Microsoft's ( MSFT ) Azure language models and

algorithms in a partnership to launch a new e-commerce chatbot.

Among Gupta's clients is Indian ayurvedic products firm

Kapiva, which has deployed a LimeChat bot for customer

interactions over WhatsApp.

Keying in a prompt - "What kind of diet should I have to

reduce weight?" - yielded an AI meal-plan creator. A follow-up

query in English and Hindi about how a slimming juice differs

from another item was also answered, with the chatbot eventually

sharing links to Kapiva products with a smiling emoji. Kapiva

didn't respond to Reuters questions.

LimeChat's rivals include Reliance, the

conglomerate chaired by Mukesh Ambani, which acquired Indian

startup Haptik in 2019.

Haptik says it offers "AI agents that deliver human-like

customer experiences" that cost $120 and can cut support costs

by 30%. Revenue skyrocketed to almost $18 million last year from

less than $1 million in 2020, disclosures show.

Haptik promoted a webinar in September by posing the

question: "What if you had a full-time employee who never sleeps

and costs just 10,000 rupees?"

"We are seeing a huge shift," Haptik product manager Suji

Ravi said in the webinar, which Reuters reporters attended.

"Brands are not investing in human agents and they want to

deploy AI agents."

For LimeChat client Mamaearth, an Indian personal-care

brand, the main attraction of AI chatbots is scalability, said

Vipul Maheshwari, head of product and analytics at parent firm

Honasa Consumer.

"Providing good customer support is make or break for us,"

he said. "But can we infinitely scale my customer support team?

Absolutely not."

The chatbot used by Mamaearth could go beyond simple

assistance like order tracking, and help users with queries such

as recommending the right products during pregnancy or, in some

cases, handle an agitated customer, Maheshwari said.

COFFEE WITH NEHA

The promise and perils of AI are evident at The Media Ant.

The Bengaluru-based advertising agency cut 40% of its workforce

to about 100 over the past year and vacated space in another

building to save on rent, said founder Samir Chaudhary.

The firm eliminated 15 salespeople, replacing them with AI

bots that identify leads and send emails to prospective

customers, Chaudhary said. A six-member call center was replaced

with a voice agent called Neha that speaks in near-flawless,

Indian-accented English.

When a Reuters reporter asked Neha about advertising on

YouTube, she sought details about the budget and target markets,

noted the requirements, and ended the conversation cheerfully:

"I will email you the details ... have a great day."

"Ask her out for a coffee and she will laugh it off,"

Chaudhary said.

Yet the race to embrace AI isn't always smooth for

companies.

Take Sweden's Klarna ( KLAR ). Chatbots helped the fintech firm cut

thousands of jobs last year, but its CEO told Reuters in

September the company is now "trying to course correct" and use

the technology to improve products rather than reduce costs.

Chatbots have limitations. While most generic

e-commerce-related queries posed by a Reuters reporter were

handled well by LimeChat bots, some stumped them.

When LimeChat client Knya's bot was asked for proof of its

claim that a million medical professionals trust its products,

such as its stethoscopes, it replied: "I am sorry, I don't have

enough information to answer your question." Knya didn't respond

to a request for comment.

Customer surveys show chatbots are still disliked by many.

An August 2024 EY survey of 1,000 Indian consumers found 62%

made purchases influenced by AI recommendations, compared with

30% globally. Yet, "the desire for a human connection remains

strong," EY noted, with 78% preferring online platforms that

provide human support.

LimeChat's Gupta, though, said well-trained AI agents could

resolve queries faster than humans. He said many standard bots

pass conversations to a human agent when they encounter angry

customers: "You need a very small number of people to just

handle negative experiences."

FROM JAVA TO AI

In the 1990s and 2000s, India's tech boom fueled rural-to-urban

migration. Cities like Bengaluru became outsourcing hubs as

domestic firms, including Tata Consultancy Services,

Infosys and Wipro, grew into global

juggernauts.

That expansion trickled through to Ameerpet, a Hyderabad

neighborhood where university graduates fill classrooms to learn

IT skills and earn certifications for tech jobs.

Ameerpet's training centers traditionally offered courses in

Microsoft Office ( MSFT ) and programming languages like Java. Visiting

in April, Reuters found these centers are increasingly focused

on AI training.

Outside one, Quality Thought, a banner featured a robot

overlooking a globe with the letters "AI."

The center was offering a nine-month course in AI data

science and prompt engineering for about $1,360, more than

double the price of a traditional web-development program.

"Recruiters are asking for students with basic AI skills,"

staffer Priyanka Kandulapati said. "We are going to streamline

our courses even further to suit the demand."

In a discussion with startup founders last month about the

pace of change, venture capitalist Vinod Khosla, who co-founded

Sun Microsystems, offered a stark view of the future for India.

"All IT services will be replaced in the next five years,"

he said. "It's going to be pretty chaotic."