AI Adoption and Labor Demand Reallocation in India

Artificial Intelligence (AI) is increasingly reshaping labor markets by altering the composition of tasks and skills demanded by firms. While evidence from advanced economies is growing, empirical research on developing economies such as India remains limited. This paper examines how AI adoption affects labor demand reallocation across occupations in India. Using sample job postings data and a task-based AI exposure index, we demonstrate that occupations intensive in non-routine cognitive tasks experience rising labor demand, while routine-intensive occupations face declining demand. The findings suggest that AI in India leads primarily to labor reallocation rather than widespread job displacement, with important implications for skill development and labor market policy.