Generative artificial intelligence (AI) is beginning to alter hiring patterns in South Asia, with multinational companies (MNCs) and firms integrated into global value chains (GVCs) reducing recruitment more sharply than domestic firms, signalling the technology’s early impact on the region’s export-oriented services sector, according to the World Bank’s World Development Report 2026.
The report, released on Tuesday, found that online job postings across South Asia fell by 1.6 per cent following the release of ChatGPT in late 2022, even as demand for AI-related skills increased. The decline was more pronounced among MNCs and firms linked to GVCs than among local firms, suggesting that companies with greater access to AI technologies and internationally mobile operations are adjusting their hiring strategies more quickly, the report said.
The findings carry particular significance for India, whose information technology services, business process management industry, and expanding network of global capability centres are deeply integrated into multinational supply chains and depend heavily on exports of digitally deliverable services.
According to the report, multinational firms may find it easier to automate tasks or relocate work across borders, while domestic firms have so far been slower to adopt AI technologies. As a result, the immediate employment effects are becoming visible first among internationally connected firms rather than across the broader economy, it observed. “Because of effects on job displacement and job losses, AI has a strong negative relationship with the labour share of income of high- and medium-skill workers, primarily through wage declines as the use of AI increases,” the report said.
The World Bank also cautioned that AI could gradually erode the outsourcing advantages that have supported economic growth in countries such as India and the Philippines over the past two decades. While emphasising that evidence on AI’s labour market effects remains mixed and continues to evolve, the report pointed to early signs that some routine digital work is already being displaced.
“AI could close off a promising route to middle-class employment in many developing economies, threatening call centre work and entry-level jobs in software, finance, and business services. It could worsen electricity and water shortages. It could deepen dependence on foreign technology — and force poorer countries to choose between rival AI systems controlled by the most powerful nations. It could bring an array of other unwanted outcomes: greater income inequality, stealthier misinformation, and political repression,” said Indermit Gill, senior vice-president and chief economist at World Bank group.
Citing data from an online freelance platform, the report showed that jobs outsourced to developing countries declined by 39 per cent in 2025, with the steepest fall occurring in occupations most exposed to AI automation. It said sectors such as call centres, customer support, data processing, and back-office services, which have underpinned growth in countries such as India and the Philippines, could come under pressure as AI becomes capable of performing more office and knowledge-based tasks.
Despite these developments, the World Bank argued that fears of widespread job losses in developing economies are overstated. It estimated that fewer than one in 10 jobs in developing countries are susceptible to AI-driven automation, compared with more than one-third of jobs in high-income economies. By contrast, around one in six jobs in developing economies are expected to be enhanced by AI through productivity gains rather than replaced outright.
The report argued that the larger opportunity for countries such as India lies not in building frontier AI models but in adapting existing technologies to local languages, institutions, and business needs. It recommended that governments and businesses prioritise the widespread adoption of smaller, task-specific AI applications that can improve productivity across sectors, including agriculture, healthcare, education, and public administration, instead of concentrating resources on developing large language models.
The report also highlighted examples from India where AI is already delivering tangible benefits. It cited AI-based weather forecasting in Telangana, which helped small farmers save as much as $560 per farmer by improving agricultural decision-making, as evidence that locally adapted AI applications can generate sizeable economic returns even without cutting-edge computing infrastructure.
“Developing countries should leave it to the rich world to agonise over whether AI will one day doom humanity. Their own question is more immediate: Will they again arrive late to a technological revolution? Or will they use it this time to improve the lives of millions? Today’s developing economies missed the first Industrial Revolution and spent the next two centuries paying the price. They cannot afford to miss this one,” Gill said.
