In a startup office in this Indian city, Developers are improving artificial-intelligence chatbots that talk and send messages like humans.
The company, LimeChat, has a bold goal: to make customer-service jobs nearly obsolete. It says its generative AI agents enable customers to reduce the number of workers needed to handle 10,000 monthly queries by up to 80%.
“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 taking over jobs previously performed by headset-wearing graduates in technical support, customer service and data management, sparking a struggle to adapt, a Reuters examination found.
It’s driving business for AI startups that help companies reduce staffing costs and scale operations — even though many consumers still prefer dealing 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.
Reuters found that jobs created by routine tasks are under threat from technology, so instead of slamming the brakes, the country is moving forward, betting that a let-it-rip approach will create enough new opportunities to absorb those displaced. The outcome of India’s gamble has significance far beyond its borders – it is a test case for whether embracing AI-powered disruption can lift a developing economy or become a cautionary tale.
Consultancy Grand View Research estimates that the global conversational AI market is growing 24% per year and should reach $41 billion by 2030.
India – which depends on IT for 7.5% of its GDP – is leaning towards. In a February speech, Prime Minister Narendra Modi had said, “Work does not disappear because of 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 Bath University’s Center for Development Studies, criticized the government for its lack of promptness in assessing the impacts of AI on India’s youth workforce. “There’s no gameplan,” he said.
Business process management employs 1.65 million employees in call centers, payroll and data handling in India. Despite growing demand for AI coordinators and process analysts, hiring has declined due to increasing automation and digitalization, said Neeti Sharma, CEO of staffing firm TeamLease Digital.
TeamLease Digital figures show that the number of net employees in this segment, which represents one-fifth of IT output, has increased by less than 17,000 employees in each of the last two years, to 130,000 in 2022-2023 and 177,000 in 2021-2022.
Reuters spoke to three current and five former customer-service workers who described growing job insecurity and the integration of AI, including tools that suggest responses and bots that handle almost all routine questions autonomously. Megha S, 32, was earning $10,000 a year from a Bengaluru-based software solutions provider. He said he was fired last month, just ahead of India’s festive season, as the company moved to implement AI tools to review the quality of sales calls.
“I was told that I am the first person to be replaced by AI,” said Megha, who spoke on the condition that her full name and former employer not be identified. “I haven’t told my parents.”
Former labor ministry secretary Sumita Dawra, who oversaw the Indian government’s task force on the impact of AI on the workforce before retiring in March, said while the technology offers productivity gains that will lead to new jobs, India may consider stronger social protection measures like unemployment benefits to help displaced people during the transition.
However, a senior Indian official told Reuters the government believes AI will ultimately have little impact on overall employment. India’s IT and labor ministries and Modi’s office did not respond to requests for comment.
Apart from AI, factors impacting India’s IT sector landscape include US tariffs; A US lawmaker’s proposal to impose a 25% tax on firms that use foreign outsourcing services; and President Trump’s $100,000 cap on new H-1B visas, which are widely used by tech companies to sponsor Indian workers.
Investment bank Jefferies predicted in September that India’s call centers will lose 50% of revenue and about 35% of other back-office functions due to AI adoption over the next five years.
This will lead to the loss of jobs in the near future 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 set up India’s first call center with 18 employees for GE Capital in the 1990s, where workplaces were divided by curtains hanging from the ceiling.
Bhasin, who founded IT services firm Genpact, said that in the long run, India can transform from a “back office” to the world’s “AI factory” by capitalizing on the demand for AI engineers and automation deployment.
One beneficiary of that demand is LimeChat, which Reuters visited in August. Co-founder Gupta said his developers and engineers have helped automate 5,000 jobs across India. The company’s bots handle 70% of its customer complaints and it plans to achieve 90-95% within a year, he said.
“If you are paying us Rs 100,000 per month, you are automating the work of at least 15 agents,” Gupta said. At that price — about $1,130 — the service costs the equivalent of about three customer-care employees, he said.
Regulatory disclosures show LimeChat’s sales are expected to grow from $79,000 two years ago to $1.5 million in 2024. Last year, the firm began integrating Microsoft’s 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 to interact with customers on WhatsApp.
Giving a prompt – “What kind of diet should I follow to lose weight?” – Received an AI meal-planning maker. A follow-up query in English and Hindi about how the slimming juice is different from any other item was also answered, with the chatbot eventually sharing links to Kapiva products along with a smiling emoji. Kapiva did not respond to Reuters questions.
LimeChat’s rivals include Mukesh Ambani-led conglomerate Reliance, which acquired Indian startup Haptic in 2019.
Haptic says it provides “AI agents that deliver human-like customer experiences” that cost $120 and can cut support costs by 30%. Revenue rose to nearly $18 million last year, up from less than $1 million in 2020, the disclosures show.
Haptik, while promoting a webinar in September, asked the question: “What if you have a full-time employee who never sleeps and his salary is only Rs 10,000?”
“We are seeing a huge change,” Haptic product manager Suji Ravi said at the webinar, which was attended by Reuters reporters. “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 expand our customer support team infinitely? Absolutely not.”
Maheshwari said the chatbot used by Mamaearth can go beyond simple assistance like order tracking, and help users with questions like recommending the right products during pregnancy or, in some cases, handling an agitated customer.
The promise and peril of AI is evident in The Media Ant. The Bengaluru-based advertising agency cut its headcount by 40% last year to about 100 and freed up space in another building to save on rent, founder Sameer Chaudhary said.
The company laid off 15 salespeople and replaced them with AI bots that identify leads and send emails to potential customers, Chaudhary said. The six-member call center was replaced with a voice agent named Neha, who speaks in near-flawless, Indian-accented English.
When a Reuters reporter asked Neha about advertising on YouTube, she asked for details about the budget and target markets, noted the requirements and ended the conversation cheerfully: “I’ll email you the details… have a nice day.”
“Ask her for coffee and she’ll laugh it off,” Chowdhury said.
Yet the race to adopt AI is not always easy for companies. Take Sweden’s Klarna. Chatbots helped the fintech firm cut thousands of jobs last year, but its CEO told Reuters in September that the company is now “trying to do the right thing.” And use technology to improve products rather than reduce costs.
Chatbots have limitations. While most of the common e-commerce-related questions asked by Reuters reporters were handled well by the LimeChat bots, a few caught them off guard.
When LimeChat client Knya’s bot was asked for evidence of its claim that one million medical professionals trust its products, such as its stethoscopes, it replied: “I’m sorry, I don’t have enough information to answer your question.” Virgo did not respond to a request for comment.
Customer surveys show that chatbots are still disliked by many people.
An EY survey of 1,000 Indian consumers in August 2024 found that 62% made purchases influenced by AI recommendations, compared to 30% globally. Still, “the desire for human connection remains strong,” EY notes, with 78% preferring online platforms that offer human assistance.
However, LimeChat’s Gupta said well-trained AI agents can solve queries faster than humans. He said many standard bots turn the conversation over to a human agent when they encounter angry customers: “You need a very small number of people to handle negative experiences.”
In the 1990s and 2000s, India’s technology boom led to rural to urban migration. Cities like Bengaluru became outsourcing hubs as home-grown companies including Tata Consultancy Services, Infosys and Wipro became global giants.
The expansion reached Hyderabad’s Ameerpet neighborhood, where university graduates fill classes to learn IT skills and earn certifications for tech jobs.
Ameerpet’s training centers traditionally offer courses in programming languages like Microsoft Office and Java. Visiting in April, Reuters found that these centers are increasingly focusing on AI training.
Outside one, Quality Thought, a banner showed a robot tracking 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 seeking students with basic AI skills,” said employee Priyanka Kandulapati. “We are going to further streamline our courses to meet demand.”
In a discussion with startup founders last month about the pace of change, venture capitalist Vinod Khosla, co-founder of Sun Microsystems, offered a candid view of India’s future.
“All IT services will be transformed in the next five years,” he said. “It’s going to be quite chaotic.”
