Zoho Founder Sridhar Vembu: AI Boom Slows IT Job Creation, Employment Is India's Biggest Challenge

Sridhar Vembu, founder and chief scientist of Zoho, has said that India's biggest economic challenge is creating enough jobs for its large and growing young population. He warned that the IT sector is no longer generating employment at the pace it once did, as companies shift spending from hiring to artificial intelligence (AI) infrastructure and data centres.

In a post on X, Vembu said companies, including Zoho, have not carried out layoffs but have also not added many new jobs in recent years. According to him, a growing share of company budgets that would previously have gone toward hiring is now being spent on AI infrastructure and data centres, with rising server and memory costs adding to the pressure.

While AI has made software development faster and more productive, Vembu questioned whether the global software market needs significantly more software. "The money that would have gone to new employees is now going to AI and data centre 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. While AI allows us to produce more software quicker, does the over-saturated global software market need a lot more software? Like any commodity industry, the focus shifts to quality, reliability, brand and so on and growth will be much slower," he wrote.

He pointed out that enterprise customers are redirecting their own technology budgets towards AI. Even companies leading the AI boom, he noted, are investing heavily in infrastructure and borrowing large sums to fund expansion, even though it remains uncertain whether those investments will eventually deliver the profits needed to justify the spending.

Looking beyond IT, Vembu said it is unclear which industries can absorb India's growing workforce. He observed that advances in automation have reduced the number of jobs created even in large-scale manufacturing, making employment generation a broader economic challenge rather than one limited to the technology sector.

Although automation makes products cheaper and boosts productivity, Vembu said the more difficult question is how economies can ensure people continue to earn enough to buy those increasingly affordable goods. He added that ideas such as universal basic income are gaining attention globally, while India already has welfare schemes that partially serve a similar purpose, and political pressure for such support is likely to grow.

"That 'only' question, simple in theory, is not easy in practice. 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 wrote further.