Bengaluru, India’s tech hub, has traditionally been the destination for IT professionals. The city is abode to thousands of workers, a number of whom live in inexpensive dwellings such as paying guest (PG) facilities or rent low-rent apartments.
But current trends indicate that the city is likely to experience one of the most severe job crises in its history, fuelled by large-scale layoffs in the IT industry and the surging growth of artificial intelligence (AI) and automation. The crisis will not just affect the tech professionals but will create a ripple effect on the housing market, property investments, and local enterprises. That’s why this imminent change is a dark headwind for Bengaluru’s economy.
Why is this happening?
Talking in global contexts, WEF (World Economic Forum) has estimated that AI will replace approx. 85 million jobs by 2025. Freethink says that 65% of retail jobs could be automated by that year, saying that this is owed to technological advancements, rising costs and wages, tight labor markets, and reduced consumer spending.
Harvard Business Review observes “The introduction of ChatGPT and image-generating tools led to nearly immediate decreases in posts for online gig workers across job types, but particularly for automation-prone jobs. After the introduction of ChatGPT, there was a 21% decrease in the weekly number of posts in automation-prone jobs compared to manual-intensive jobs. Writing jobs were affected the most (30.37% decrease), followed by software, app, and web development (20.62%) and engineering (10.42%).” Such trends are being observed worldwide, and as the hub of IT in India, Bengaluru is impacted as well.
One of the significant sectors facing AI replacement and even affecting giants like Amazon is Warehousing, as it is set to fire 14,000 employees as per reports. Automation technologies like robotic process automation (RPA) and AI-driven inventory management systems have replaced many manual jobs.
Forbes also says that According to an MIT and Boston University report, AI will replace as many as two million manufacturing workers by 2025. This shall happen in aspects such as:
- Warehousing: Automated storage and retrieval systems (ASRS) and AI-powered robots have reduced the need for human labor in tasks like sorting, packing, and inventory tracking.
- Production Hubs: AI-driven machinery and predictive maintenance systems have streamlined operations, leading to fewer roles for machine operators and maintenance staff.
It’s estimated that AI adoption in warehousing and production hubs in Bengaluru has led to the replacement of approximately 10,000 to 15,000 jobs in FY24. Mainly encompassing roles such as manual sorting, packing, and inventory management, which have been increasingly automated through AI-powered systems and robotics.
Recently, a social media post of Sumit Shah, Founder of Dukaan, went viral, where he claimed that ‘We had to off 90% of our support team because of an AI Chat Bot.
WAREHOUSING:
Reports from firms like McKinsey and PwC highlight that warehousing is experiencing a 20–30% replacement of repetitive manual jobs due to robotics and AI systems. Bengaluru, as a major logistics and production hub, sees a proportionate transition, given its heavy reliance on manual processes in these industries traditionally.
PRODUCTION HUBS:
Industry data indicates that AI-driven assembly line systems and predictive maintenance tools are becoming widespread, particularly in high-tech and small-scale manufacturing units. Job losses in such hubs range from 5% to 10% of the existing workforce, based on historical figures.
Employment Size in These Sectors: Warehousing and production hubs in Bengaluru collectively employ over 100,000 to 120,000 workers (approx.). A modest estimate of 10–15% automation gives the job replacement figure of 10-15,000 workers being made obsolete.
Other Areas of Decline in Hiring as observed:
- IT Sector: Decline in Hiring: Approximately 10%. Decline in hiring for entry-level roles like software developers and testers.
- Finance and Accounting: Decline in Hiring: Around 8% reduction in hiring for clerical roles such as book-keeping and data entry.
- Customer Service and BPO: Decline in Hiring: Approximately 12% drop in hiring for call center and customer support roles.
The summation of job loss across giants and small businesses alike due to AI adoption can be well estimated to be beyond 50,000+ in Bengaluru in the last year. However, with the familiarisation of AI with the upcoming graduates, they shall be in a better position to opt for more technical and analytical roles rather than ones requiring manual labour.
The IT Job Market: The Storm on the Horizon
Over the next several weeks and months, Bengaluru is likely to see huge scale retrenchment in the IT industry, primarily of low-paying staff. Low-paying staff—are often those with the most marginal homes—are first in line for layoffs when employers come under money stress, save costs, or switch to robots. With efforts to trim expenses, low-tier software programmers are losing their jobs to AI equipment that can programme and debug programmes with more proficiency and less money.
These layoffs will have an instant impact on the paying guest (PG) market and establishments near Bengaluru. PG facilities are usually the cheapest option available for low-paid IT workers. When these workers lose their jobs, the demand for cheap housing will drop, causing financial hardship for landlords and PG operators. Most of these landlords, who invested big time in properties hoping to earn long-term rental income from IT professionals, will witness a sudden drop in demand and may watch their investments depreciate.
Real Estate Blues: Investors Will Suffer
For real estate investors, especially those near the Outer Ring Road (ORR), where there are a number of tech parks and offices, the situation is worse. These investors invested crores of rupees in properties looking for regular returns from the tech-led economy. But with the looming wave of retrenchments, most of them will have their investments lose their lustre. The once-bustling market for low-cost rental properties may turn into dust, putting these investors with highly depreciated assets and vacant buildings.
Why This Job Crisis Isn’t Obvious Yet?
One of the reasons this impending crisis is not so obvious is that most people downplay the quick pace of AI and its potential to displace low-level tech work. Collaborating with other software developers, it is increasingly apparent that AI and automation are transforming the tech sector. Numerous activities that previously needed human touch—like coding, debugging, and testing—can now be performed by AI tools more accurately and at a lower cost
The Ripple Effect: Finance, Operations, and More
The effects of automation and AI do not just remain in the technology industry. Soon, sectors such as operations, finance, and chartered accountancy will be hit by the same waves. AI applications are already replacing functions of financial analysis, audit jobs, and generating reports. Most jobs in these sectors that used to be manual are now being automated, thus reducing the demand for human effort.
For investors, employees, and businesses in general, this is a troubling time. The coming months may witness Bengaluru and India experience a serious economic slump, perhaps the biggest in the nation’s history. Though the consequences of this crisis are not yet immediately visible to all, those in the hardest-hit industries are already able to read the handwriting on the wall. With the rise of AI and automation, the jobs will have to get used to a new norm, one in which human workforce is being steadily replaced by machinery. The months ahead will prove pivotal in what shape Bengaluru’s economy, and its role in the wider picture of India’s employment scenario, will look like.
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