Artificial Intelligence (AI) and its Impact on India's IT Services Sector
Science & Technology
- PYQs8
- Articles1
Background
AI is a transformative technology with profound implications for India's economy, employment, and global competitiveness, particularly for its dominant IT services sector. Understanding its challenges and opportunities is crucial for policy formulation, skill development, and economic planning to ensure inclusive growth and maintain India's position as a global IT hub.
Artificial Intelligence (AI) refers to the simulation of human intelligence in machines programmed to think and act like humans, encompassing areas like machine learning and natural language processing. India's IT services sector is a cornerstone of its economy, contributing significantly to GDP, exports, and employment, making its adaptation to transformative technologies like AI crucial for sustained growth and global competitiveness.
Facts & tables
- AI as a megatrend
- Reshaping the market landscape and disrupting business models of India-based IT companies.
- Dual impact on labor
- Reduces demand for low-skilled labor (e.g., coding, testing) but expands demand for high-skilled services (e.g., consulting, digital transformation).
- Business model transformation
- Shift from offering manpower to selling expertise and solutions; increasing adoption of outcome-based contracts.
- Financial implications
- Potential for uneven impact on revenue growth and margin pressures due to AI-related investments and macroeconomic uncertainties.
| Risk | Opportunity |
|---|---|
| Reduced demand for low-skilled labor (coding, testing) | Expanded demand for consulting & digital transformation |
| Disruption of old business models | New roles as 'robot's operator, trainer, or fixer' |
| Margin pressures from AI investments | Leveraging existing relationships for GCC partnerships |
| Type | Reference |
|---|---|
| Conceptual area | Indian Economy |
| Conceptual area | Science & Technology |
Prelims angle
Prelims angle: Statement-based questions
Prelims angle: Factual recall
- AI is a megatrend disrupting Indian IT business models.
- It creates demand for high-skilled roles (consulting) while reducing low-skilled jobs.
- Shift from manpower to expertise-based, outcome-driven contracts.
- Indian IT firms face margin pressures due to AI investments.
- Adaptation is key for sustained revenue growth and competitiveness.
| Year | Framing tags |
|---|---|
| 2026 | Statement-based questions, Factual recall |
| 2026 | Multi-statement analysis, Conceptual understanding |
| 2026 | Multi-statement analysis, Factual recall |
| 2026 | Statement-based questions, Factual recall |
| 2025 | Statement-based questions, Factual recall |
| 2025 | Statement-based questions, Factual recall |
| 2017 | Statement-based questions, Policy measures |
| 2016 | Definition-based questions, Terminology-based question |
Timeline
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Indian Economy
Conceptual area
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Science & Technology
Conceptual area
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Prelims 2016
Definition-based questions, Terminology-based question
-
Prelims 2017
Statement-based questions, Policy measures
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Prelims 2025
Statement-based questions, Factual recall
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Prelims 2025
Statement-based questions, Factual recall
-
Prelims 2026
Statement-based questions, Factual recall
-
Prelims 2026
Multi-statement analysis, Conceptual understanding
-
Prelims 2026
Multi-statement analysis, Factual recall
-
Prelims 2026
Statement-based questions, Factual recall
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Weak macroeconomic conditions will continue to constrain IT spend for another three years, says S&P’s Chi Yang Leong
AI is a megatrend disrupting India's IT sector by altering business models, impacting job roles (reducing low-skilled, increasing high-skilled), and necessitating a shift towards expertise-driven, outcome-based services, posing both risks and opportunities for revenue growth and margins.
See also
Past papers
2016–2026 · 8 questions
In the news
Weak macroeconomic conditions will continue to constrain IT spend for another three years, says S&P’s Chi Yang Leong
AI is a megatrend disrupting India's IT sector by altering business models, impacting job roles (reducing low-skilled, increasing high-skilled), and necessitating a shift towards expertise-driven, outcome-based services, posing both risks and opportunities for revenue growth and margins.
Try these PYQs
Consider the following statements with respect to the AI Impact Summit, 2026 held in New Delhi :
1. The Summit's intellectual framework was based on three foundational Sutras : People, Planning, and Progress.
2. The Preamble of the Summit stresses Democratising AI Resources, which acknowledges the Charter for Democratic Diffusion of AI as a binding framework to support locally relevant innovation and strengthen resilient AI ecosystems while respecting national laws.
3. The New Delhi Declaration on AI Impact was structured around seven Chakras (Pillars), which included Access for Social Empowerment, AI for Science, and Secure and Trusted AI.
Which of the statements given above is/are correct ?
Statement 1 is Incorrect: The Summit's intellectual framework and core philosophy were anchored in three foundational principles (Sutras): People, Planet, and Progress, not People, Planning, and Progress. Statement 2 is Incorrect: The New Delhi Declaration introduced the Charter for Democratic Diffusion of AI to promote affordable access to foundational AI resources, support local innovation, and build resilient AI ecosystems. However, it was established as a voluntary and non-binding framework, respecting national laws, rather than a binding treaty. Statement 3 is Correct: The New Delhi Declaration on AI Impact was structured around seven thematic pillars of action, officially referred to as Chakras. These foundational areas included Access for Social Empowerment, AI for Science, and Secure and Trusted AI, alongside Democratizing AI Resources, Economic Growth & Social Good, Human Capital Development, and Resilient, Efficient & Innovative AI Systems. Therefore, option D is the correct answer.
The term ‘Core Banking Solution’ is sometimes seen in the news. Which of the following statements best describes/describe this term?
1. It is networking of a bank’s branches which enables customers to operate their accounts from any branch of the bank on its network regardless of where they open their accounts.
2. It is an effort to increase RBI’s control over commercial banks through computerization.
3. It is a detailed procedure by which a bank with huge non-performing assets is taken over by another bank.
Select the correct answer using the code given below:
A core banking solution is a centralized system that integrates various banking functions across a bank's branches. It allows for:
- Networked branches: Customers can access their accounts and conduct transactions from any branch within the bank's network, regardless of where they originally opened their account.
- Improved efficiency: CBS automates many manual processes, leading to faster transactions and better customer service.
- Centralized data management: All customer information and account data are stored in a central location, facilitating easier access and record keeping. Therefore, the correct answer is 1 only.
GPS-Aided Geo Augmented Navigation (GAGAN) uses a system of ground stations to provide necessary augmentation. Which of the following statements is/are correct in respect of GAGAN?
I. It is designed to provide additional accuracy and integrity.
II. It will allow more uniform and high quality air traffic management.
III. It will provide benefits only in aviation but not in other modes of transportation.
Select the correct answer using the code given below.
✅ Statement I: Correct
*GAGAN is an Indian SBAS developed by ISRO and AAI to enhance GPS accuracy and integrity, crucial for aviation safety.* ✅ Statement II: Correct
*It improves GPS reliability and accuracy, enabling better air traffic management and safer, efficient navigation.* ❌ Statement III: Incorrect
*GAGAN’s benefits extend beyond aviation to railways, roadways, maritime, agriculture, and disaster management.* Correct Answer: Only Statements I and II are correct.
Consider the following statements about Mission Sudarshan Chakra of India:
1. It aims to enhance India's air defence, ballistic missile defence and aerial offensive capabilities.
2. This Mission is being designed to enhance rapid, precise, and powerful defence responses, reinforcing India's strategic autonomy.
3. One of the aims of this Mission is to cover all public places of India by an expanded nationwide security shield by 2035.
Which of the statements given above is/are correct?
Statement 1 is Correct: Mission Sudarshan Chakra is designed as a multi-domain security umbrella. It explicitly aims to enhance India's air defence, ballistic missile defence, and aerial offensive capabilities, acting as both a defensive shield and an offensive sword. Statement 2 is Correct: The mission integrates advanced technologies like AI, space-based sensors, and directed energy weapons to ensure rapid, precise, and powerful defence responses. This indigenous development (incorporating projects like Project Kusha) is specifically aimed at reinforcing India's strategic autonomy and self-reliance in the defence sector. Statement 3 is Correct: A major distinguishing feature of this initiative is its expanded scope. Announced as a 10-year national security initiative, a stated goal of the mission is to bring all public places (including hospitals, railways, and religious/cultural sites) under an expanded nationwide security shield by 2035, moving beyond the conventional protection of just military and strategic installations. Therefore, the correct option is A.
Consider the following statements regarding AI Action Summit held in Grand Palais, Paris in February 2025:
I. Co-chaired with India, the event builds on the advances made at the Bletchley Park Summit held in 2023 and the Seoul Summit held in 2024.
II. Along with other countries, US and UK also signed the declaration on inclusive and sustainable AI.
Which of the statements given above is/are correct?
✅ Statement I: Correct
*India co-chaired the AI Action Summit in Paris (Feb 2025), continuing efforts from the Bletchley Park (UK, 2023) and Seoul (South Korea, 2024) Summits on AI governance.* ❌ Statement II: Incorrect
*The joint statement on ‘Inclusive and Sustainable AI’ was signed by 58 countries including India and China, but the US and UK did not sign due to concerns about overregulation.* Correct Answer: Only Statement I is correct.
Show 3 more PYQs
Which of the following statements regarding the features of blockchain technology are correct?
1. Records stored in the database may be made visible to relevant stakeholders without risk of alteration.
2. Copies of the entire database are stored on multiple computers on a network, syncing within seconds.
3. Consortium blockchain is a blend of public and private blockchains allowing selective data access.
4. Mathematical algorithms make it impossible to change or delete any data once recorded and accepted.
Select the answer using the code given below:
Statement 1 is Correct: Blockchain's architecture allows data to be shared transparently with relevant stakeholders. Because the ledger is append-only and secured by network consensus, users can view records without the risk of unauthorized alteration. Statement 2 is Correct: Blockchain operates as a decentralized database (Distributed Ledger Technology). Identical copies of the entire ledger are stored across multiple computers (nodes) on a network. These nodes continuously communicate and sync rapidly (often within seconds, depending on the specific blockchain protocol) to maintain a single source of truth. Statement 3 is Correct: A consortium blockchain is a hybrid model that blends features of both public (open) and private (closed) blockchains. It is governed by a pre-approved group of organizations rather than a single entity or the open public, allowing for semi-decentralized control and selective data access. Statement 4 is Correct: Blockchain uses complex mathematical algorithms (cryptographic hashing) to link blocks. Once data is recorded and validated by the network, changing or deleting it requires altering all subsequent blocks and gaining majority network control, making tampering practically impossible. *Note: While all four statements are factually correct based on the principles of blockchain technology, there is no option provided that includes all of them (1, 2, 3, and 4). Option C is the most comprehensive and appropriate choice as it correctly identifies statements 1, 2, and 4 as a valid set.* Therefore, the correct option is C.
Which of the following statements about Rare Earth Elements (REEs) and Critical Minerals is/are correct ?
1. Modern technological innovations including Artificial Intelligence, robotics and space exploration extensively utilise Rare Earth Elements (REEs).
2. China has the highest share in mining of REEs followed by India.
3. The Government of India launched the National Critical Mineral Mission (NCMM) in 2025 to establish a robust framework for self-reliance in the critical mineral sector.
4. Rare Earth Elements are a set of 13 metallic elements.
Select the answer using the code given below :
Statement 1 is Correct: Rare Earth Elements (REEs) are indispensable for modern technological innovations. Their unique magnetic, luminescent, and electrochemical properties make them critical for artificial intelligence hardware, robotics, space exploration, electric vehicles, and advanced defense systems. Statement 2 is Incorrect: While China dominates global REE mining, accounting for roughly 69% of global production, the second-largest producer is the United States, followed by Myanmar and Australia. India ranks much lower globally and is not the second-largest producer. Statement 3 is Correct: The Government of India officially launched the National Critical Mineral Mission (NCMM) in January 2025. The mission is a strategic blueprint designed to secure domestic and global supply chains, reduce import dependence, and establish a robust framework for self-reliance in critical minerals essential for clean energy and technology. Statement 4 is Incorrect: Rare Earth Elements are a set of 17 metallic elements, not 13. This group comprises the 15 lanthanides on the periodic table, along with scandium and yttrium, which share similar chemical properties and are typically found in the same ore deposits. Therefore, the correct option is A.
Which of the following statements is/are correct regarding Smart India Hackathon 2017?
1. It is a centrally sponsored scheme for developing every city of our country into Smart Cities in a decade.
2. It is an initiative to identify new digital technology innovations for solving the many problems faced by our country.
3. It is a programme aimed at making all the financial transactions in our country completely digital in a decade.
Select the correct answer using the code given below :
Statement 1 is incorrect: The Smart India Hackathon (SIH) is not a scheme for developing Smart Cities. Instead, it is a nationwide initiative aimed at identifying innovative digital technology solutions to solve real-world challenges across various sectors. Statement 2 is correct: The Government of India launched the Smart India Hackathon to encourage students and professionals to develop innovative digital solutions for challenges in agriculture, health, education, energy, environment, and other domains. It serves as a platform for young minds to engage in problem-solving and contribute to technological advancements. Statement 3 is incorrect: While the hackathon focuses on digital technology innovations, it is not specifically centered on digital financial transactions. Instead, it covers a wide range of sectors where technology can drive efficiency and innovation. Hence, correct answer is option (B).