India's IT industry has been a major driver of economic growth and employment for decades. However, Zoho founder Sridhar Vembu believes the rise of artificial intelligence (AI) has fundamentally changed the sector, with companies no longer creating significant new jobs and instead directing their investments towards AI.
In a post on X, Vembu described the slowdown in job creation as a serious concern for India.
"The real issue facing our nation is how to create jobs for our massive cohort of youth in this very uncertain global landscape," he wrote.
Vembu acknowledged that while Zoho has not resorted to layoffs, it has also not added many new jobs in recent years.
"Sadly, the IT industry, including Zoho, has not created many jobs in recent years. We have not laid off people, but we are not creating new jobs either," he added.
His remarks come at a time when technology companies across the world are facing growing pressure from AI. Firms such as Infosys, Oracle, Microsoft and Meta have announced thousands of layoffs over the past year.
According to Xpheno's Active Tech Jobs Outlook report for August 2026, active job openings in the IT sector have declined by 6% year-on-year to around 44,000 positions. However, total openings for technology roles stood at 1,09,000, up 6% compared to the previous year.
AI IS REPLACING HIRING BUDGETS
Vembu said the money that companies would traditionally use to recruit new employees is now increasingly being spent on AI infrastructure and data centres.
"The money that would have gone to new employees is now going to AI and data center costs, the latter due to the steep rise in server and memory prices. We are trying to control those costs but a lot of that is out of our control," he wrote.
Major technology companies such as Google, Meta and Microsoft are expected to spend hundreds of billions of dollars on AI this year. In India, companies including HCLTech and TCS are also investing in new data centres.
Vembu also questioned whether the rapid use of AI to develop software was addressing an actual market need.
"While AI allows us to produce more software quicker, does the over-saturated global software market need a lot more software?" he asked.
He argued that software is increasingly becoming a commodity, where differentiation depends more on factors such as quality, reliability and brand reputation than on simply producing more applications. According to him, growth in the sector is therefore likely to slow, with large and mid-sized enterprises increasingly shifting their IT budgets towards AI.
Vembu also expressed doubts about whether other industries would be able to generate enough employment as automation expands.
"Extensive automation means that large scale manufacturing produces few jobs," he wrote.
UNIVERSAL BASIC INCOME?
Vembu also reflected on the long-term economic implications of AI, suggesting that while automation could make goods and advanced technologies significantly cheaper, it raises an important question about how people will earn enough income to purchase them.
"As an economic thinker, this is a good thing: ultimately all kinds of goods, including advanced tech products become very affordable because production becomes so cheap. The 'only' question is how the economy is structured so people have the income to afford those affordable goods," he wrote.
He acknowledged that many view Universal Basic Income (UBI) as a possible solution.
"Some people think the answer is Universal Basic Income (UBI) and some of that is already happening in India (we call them freebies). We can expect the political pressure to do a lot more," he noted.
Vembu is not alone in raising the possibility of a universal income in the AI era. Tesla and SpaceX CEO Elon Musk has also said on several occasions that widespread automation could eventually lead to a future of universal high income.
