If you scroll through financial news today, you will likely see two completely contradictory narratives. The first warns that Artificial Intelligence is a massive, unsustainable financial bubble. The second warns that AI is coming for all of our white-collar jobs.
So, which is it? According to market analysts and tech leaders, both are true—and one is actively causing the other.
For Indian professionals, particularly those in Bengaluru, Pune, and Hyderabad, this isn’t just a distant Wall Street problem. We are witnessing the start of what financial researchers call the “human intelligence displacement spiral,” and India’s IT sector is standing right in the blast zone.
Here is how the very success of AI in replacing human jobs is paving the way for an unprecedented economic crash.
The White-Collar Wipeout is Already in Our Backyards
The idea that AI will replace jobs is no longer future speculation; it is happening right now in the most secure sectors of the Indian economy.
Just recently, TCS conducted its largest layoff drive, letting go of about 12,200 middle and senior-level executives to make the company “future-ready” for an AI-first world. TCS CEO K. Krithivasan issued a stark warning to the company’s top brass, noting that while junior associates are mastering generative tools, senior management is still just “reading and hearing” rather than getting hands-on.
The writing is on the wall across the industry. At Infosys’s Investor AI Day, Nandan Nilekani bluntly warned that “AI Is a Fundamental Root-and-Branch Surgery” and poses an “Execution Risk, Not Opportunity Risk”.
During a recent sit-down in Bangalore with entrepreneur Nikhil Kamath, Anthropic CEO Dario Amodei compared the AI revolution to a “tsunami society is actively ignoring,” making the case that traditional coding is a dying skill. This echoes the warnings of prominent venture capitalist Vinod Khosla, who also recently told Kamath that traditional college degrees are becoming increasingly useless in this new landscape.
The Trillion-Dollar “Money Furnace”
While AI proves its competence at writing code and managing workflows, the global financial infrastructure propping it up looks increasingly like a mirage.
Analyst Julian Whatley refers to the current AI industry as a “Money Furnace,” noting that it relies on an “Ouroboros” economy. Tech giants like Microsoft, Amazon, and Google are essentially acting as their own customers, engaging in circular financing to fabricate revenue growth.
The physical infrastructure to support this infinite growth physically cannot exist due to grid physics and rapid hardware depreciation, meaning the industry is trying to out-engineer reality.
The “Human Intelligence Displacement Spiral”
So, how do the job losses cause the bubble to burst, and why does it matter to India?
A fascinating report from Citrini Research models exactly how this paradox unravels, and it targets the heart of the Indian economy.
India’s IT services sector exports over $200 billion annually. This sector is the single largest contributor to India’s current account surplus and is the offset that finances the country’s persistent goods trade deficit.
The entire Indian IT model is built on one simple value proposition: Indian developers and white-collar workers cost a fraction of their American counterparts.
But here is the fatal flaw: The marginal cost of an AI coding agent has collapsed to essentially the cost of electricity.
As AI tools become capable of natively replicating mid-market SaaS products and workflow automation, the cost-benefit analysis changes completely. When an AI agent costs almost nothing to run, the wage arbitrage that built India’s IT capitals evaporates.
The Domino Effect: A Macroeconomic Crisis for India
When global companies rationally replace offshore workers with AI to boost their margins, they fund the creation of even better AI that can replace more jobs.
Citrini Research models a severe scenario for what this means for India in the coming years:
- Massive Contract Cancellations: As AI agents handle tasks from coding to customer service, giants like TCS, Infosys, and Wipro will see Western contract cancellations accelerate.
- Currency Collapse: Without the $200 billion IT services surplus anchoring the external accounts, the Indian Rupee is projected to face massive downward pressure, potentially falling 18% against the dollar in a matter of months.
- Systemic Economic Shock: In this modeled scenario, the evaporation of IT revenues is so severe that it forces the IMF into “preliminary discussions” with New Delhi to stabilize the economy by early 2028.
Furthermore, as displaced high-earning tech professionals in India lose their incomes, their spending collapses. This threatens the domestic consumer economy, housing markets, and private credit, mirroring the crisis projected for the US.
The Bottom Line
For decades, the Indian middle class and the country’s macroeconomic stability have relied on the global premium placed on human intelligence and the wage arbitrage of outsourcing.
The AI bubble isn’t just about overvalued tech stocks in Silicon Valley. It is a systemic crisis unfolding because we have created an abundant, nearly free substitute for human intelligence. In the process, the global economy is accidentally replacing the very workers—both in the US and in India—who keep the system running.