In a bustling Indian city, innovative startups are busy refining advanced artificial intelligence chatbots designed to communicate and interact just like real people.
One such company, LimeChat, has an ambitious vision: to render customer service roles almost completely obsolete. They claim their generative AI agents empower clients to dramatically cut their workforce by 80% while still managing thousands of monthly customer inquiries.
“Once you bring a LimeChat agent on board, you’ll never need to hire another person for that role,” stated Nikhil Gupta, the 28-year-old co-founder of the company.
Historically, India became the world’s go-to hub for back-office operations, thanks to its affordable labor and English-speaking workforce – a trend that sometimes impacted workers in other regions. Today, a new wave of disruption is here: sophisticated AI systems are taking over roles traditionally held by university graduates in technical support, customer care, and data management, sparking a rapid adaptation within the industry.
This situation is fueling growth for AI startups that offer solutions to drastically reduce staffing expenses and expand operational capacity, even as many consumers still express a preference for human interaction.
This report delves into the profound changes sweeping through India’s $283 billion IT sector, drawing insights from interviews with numerous industry leaders, recruiters, employees, and government officials. We also observed two AI startups firsthand, testing their voice and text chatbots that are increasingly handling intricate customer interactions with remarkable human-like finesse.
Instead of slowing down in the face of technology threatening routine jobs, India is pushing forward. The country is betting that a swift, unconstrained adoption of AI will generate enough new opportunities to absorb those whose jobs are displaced. The outcome of this bold move by India will have implications far beyond its borders, serving as a crucial test case: can embracing AI-driven disruption truly uplift a developing economy, or will it become a cautionary tale?
The global market for conversational AI is experiencing robust growth, projected to expand by 24% annually and reach an estimated $41 billion by 2030, according to Grand View Research.
India, where the IT sector contributes 7.5% to the national GDP, is actively embracing this trend. Prime Minister Narendra Modi, in a speech this February, emphasized that “work doesn’t vanish due to technology; its nature changes, and new types of jobs are created.”
However, not everyone shares Modi’s optimistic outlook regarding India’s readiness. Santosh Mehrotra, a former Indian official and visiting professor at the University of Bath’s Centre for Development Studies, criticized the government for its perceived lack of urgency in assessing AI’s potential impact on India’s vast young workforce, stating, “There’s no gameplan.”
The business process management sector, which includes call centers, payroll, and data handling, currently employs 1.65 million people in India. Despite a growing demand for roles like AI coordinators and process analysts, overall hiring in this segment has sharply declined due to increased automation and digitalization, as reported by Neeti Sharma, CEO of staffing firm TeamLease Digital.
In the past two years, the net increase in headcount for this sector, which accounts for one-fifth of India’s IT output, was less than 17,000 workers each year. This is a significant drop from 130,000 in 2022-2023 and 177,000 in 2021-2022, according to figures from TeamLease Digital.
Interviews with three current and five former customer-service employees revealed a growing sense of job insecurity and the widespread integration of AI tools. These include systems that suggest responses to agents and bots that autonomously handle almost all routine inquiries. Megha S., a 32-year-old who previously earned $10,000 annually at a Bengaluru-based software solutions provider, recounted being laid off last month, just before India’s festive season. Her company was moving to implement AI tools for reviewing sales call quality.
“I was told I’m the first person to be replaced by AI,” shared Megha, who chose not to reveal her full name or former employer. “I haven’t even told my parents yet.”
Sumita Dawra, who previously served as a labor ministry secretary and led an Indian government task force on AI’s workforce impact before her retirement in March, acknowledged that while AI offers productivity gains and will create new jobs, India might need to consider stronger social security measures, such as unemployment benefits, to support those displaced during this transitional period.
However, a senior Indian official indicated that the government believes AI’s ultimate impact on overall employment will be minimal. Requests for comment from India’s IT and labor ministries, as well as the Prime Minister’s office, were not answered.
Beyond AI, several other factors are casting a shadow over the future of India’s IT sector. These include potential U.S. tariffs; a proposal from a U.S. lawmaker for a 25% tax on companies utilizing foreign outsourcing services; and former President Trump’s proposed $100,000 fee for new H-1B visas, which are frequently used by tech firms to sponsor Indian workers.
Investment bank Jefferies projected in September that AI adoption would lead to a 50% revenue decrease for India’s call centers and roughly a 35% decrease for other back-office functions over the next five years.
This forecast points to significant near-term job losses in India, a country that currently commands 52% of the global outsourcing market.
“The most substantial impact will be felt by young students entering the job market directly from college,” stated Pramod Bhasin, who, in the 1990s, founded India’s first call center for GE Capital with just 18 employees, where workstations were initially separated by saris hung from the ceiling.
Looking further ahead, Bhasin, who later founded the IT services firm Genpact, suggests that India could evolve from being the “back office” to becoming the world’s “AI factory,” leveraging the growing demand for AI engineers and automation expertise.
LimeChat is one company benefiting from this surging demand. During a visit in August, co-founder Gupta shared that his team of developers and engineers has already automated 5,000 jobs across India. The company’s bots currently handle 70% of client customer complaints and aim to reach 90-95% within the next year.
“If you’re paying us 100,000 rupees per month, you are effectively automating the work of at least 15 agents,” Gupta explained. At approximately $1,130, this service costs roughly the same as employing three human customer care staff.
LimeChat’s revenue has seen explosive growth, soaring to $1.5 million in 2024 from just $79,000 two years prior, according to regulatory filings. Last year, the firm collaborated with Microsoft to integrate Azure language models and algorithms, launching a new e-commerce chatbot.
Among LimeChat’s clientele is Kapiva, an Indian ayurvedic products company that uses a LimeChat bot for customer interactions via WhatsApp.
When prompted with “What kind of diet should I have to reduce weight?”, the bot generated an AI-powered meal plan. A subsequent query, posed in both English and Hindi, about the difference between a slimming juice and another product, also received a clear answer, with the chatbot eventually providing links to Kapiva products, complete with a friendly emoji. Kapiva did not respond to inquiries about their use of the bot.
LimeChat faces competition from industry giants such as Reliance, the conglomerate led by Mukesh Ambani, which acquired the Indian startup Haptik in 2019.
Haptik claims its “AI agents deliver human-like customer experiences” at a cost of $120, potentially reducing support costs by 30%. The company’s revenue skyrocketed to nearly $18 million last year, a significant jump from less than $1 million in 2020, as per disclosures.
In September, Haptik promoted a webinar with a compelling question: “What if you had a full-time employee who never sleeps and costs just 10,000 rupees?”
“We are witnessing a massive shift,” noted Haptik product manager Suji Ravi during the webinar. “Brands are increasingly opting for AI agents over investing in human staff.”
For Mamaearth, an Indian personal-care brand and a LimeChat client, the primary appeal of AI chatbots lies in their scalability, explained Vipul Maheshwari, head of product and analytics at its parent company, Honasa Consumer.
“Delivering excellent customer support is critical for our business,” he emphasized. “But can we infinitely expand our customer support team? Absolutely not.”
Maheshwari further detailed that Mamaearth’s chatbot can go beyond basic tasks like order tracking. It can assist users with complex inquiries, such as recommending appropriate products during pregnancy, and even effectively handle agitated customers.
The dual nature of AI – its promise and its potential pitfalls – is clearly visible at The Media Ant. Samir Chaudhary, founder of the Bengaluru-based advertising agency, revealed that the firm reduced its workforce by 40% to approximately 100 employees over the past year. They also downsized office space to cut rent costs.
The company replaced 15 salespeople with AI bots that now identify leads and send emails to potential clients, Chaudhary stated. Furthermore, a six-member call center team was replaced by a voice agent named Neha, who speaks with remarkably fluent, Indian-accented English.
When a reporter inquired about advertising on YouTube, Neha efficiently gathered details regarding the budget and target markets, recorded the requirements, and concluded the conversation cheerfully: “I will email you the details… have a great day.”
“You can even ask her out for coffee, and she’ll just laugh it off,” Chaudhary added, highlighting the bot’s human-like interactions.
Despite the enthusiastic embrace, the journey to implement AI isn’t always seamless for businesses. Take Sweden’s Klarna, for example. While chatbots helped the fintech company reduce thousands of jobs last year, its CEO admitted that the company is now “trying to course correct” to focus on using the technology for product enhancement rather than solely cost reduction.
Indeed, chatbots have their limitations. While LimeChat’s bots capably handled most general e-commerce inquiries posed by a reporter, some more complex questions proved to be beyond their current capabilities.
For instance, when Knya’s bot (another LimeChat client) was asked for evidence supporting its claim that a million medical professionals trust its products, such as stethoscopes, it responded: “I am sorry, I don’t have enough information to answer your question.” Knya did not provide a comment regarding this.
Customer surveys frequently reveal that many individuals still have a strong dislike for chatbots.
An August 2024 EY survey involving 1,000 Indian consumers found that 62% made purchases based on AI recommendations, significantly higher than the 30% global average. However, EY also noted that “the desire for a human connection remains strong,” with 78% preferring online platforms that also offer human support.
LimeChat’s Gupta, however, argues that well-trained AI agents can resolve queries much faster than humans. He pointed out that many standard bots typically hand over conversations to a human agent only when encountering genuinely angry customers, meaning, “You need a very small number of people to just handle negative experiences.”
During the 1990s and 2000s, India’s burgeoning tech sector spurred a significant rural-to-urban migration. Cities like Bengaluru transformed into major outsourcing hubs, as homegrown firms such as Tata Consultancy Services, Infosys, and Wipro evolved into global powerhouses.
This expansion had a ripple effect, reaching areas like Ameerpet, a neighborhood in Hyderabad where university graduates flock to classrooms to acquire IT skills and certifications for technology jobs.
Historically, Ameerpet’s training centers offered courses in staples like Microsoft Office and programming languages such as Java. However, a visit in April revealed a clear shift, with these centers increasingly prioritizing AI training.
Outside one institution, Quality Thought, a prominent banner displayed a robot overlooking a globe, emblazoned with the letters “AI.”
This particular center was offering a nine-month program in AI data science and prompt engineering for approximately $1,360, which is more than double the cost of a traditional web development course.
“Recruiters are now actively seeking students who possess fundamental AI skills,” explained staff member Priyanka Kandulapati. “We are committed to further tailoring our courses to meet this evolving demand.”
In a recent discussion with startup founders about the rapid pace of technological change, venture capitalist Vinod Khosla, co-founder of Sun Microsystems, offered a sobering prediction for India’s future.
“All IT services will be completely superseded within the next five years,” he declared. “It’s going to be quite chaotic.”