Economic Survey 2025-26 Flags Risks to India's IT Outsourcing Model

• The Economic Survey 2025-26 warns of rising structural risks to India's IT sector due to global concentration of critical inputs like data, AI models, and technology standards.
• It questions the long-term sustainability of India's IT outsourcing model as automation and generative AI mature, potentially leading firms to bypass offshore outsourcing.
• The Survey suggests India's IT ecosystem must evolve, move up the value chain, and align with emerging technologies to retain its competitive edge.
• Generative AI poses a threat to the broader white-collar job market, with overseas firms automating routine cognitive tasks previously outsourced to Indian professionals.
• The US Professional, Business and Information Services (PBIS) sector shows an inflection point post-December 2022, where AI adoption led to economic growth without proportional job creation.

Why It Matters: India's IT outsourcing model faces significant threats from AI and global concentration of tech inputs.