BENGALURU — At a startup office in this Indian city, developers are fine-tuning artificial-intelligence (AI) chatbots that talk and message like humans.

The company, LimeChat, has an audacious goal: to make customer-service jobs almost obsolete. It says its generative AI agents enable clients to slash by 80% the number of workers needed to handle 10,000 monthly queries.

“Once you hire a LimeChat agent, you never have to hire again,” Nikhil Gupta, its 28-year-old co-founder, told Reuters.

Cheap labor and English proficiency helped make India the world’s back office — sometimes at the expense of workers elsewhere. Now, AI-powered systems are subsuming jobs done by headset-wearing graduates in technical support, customer care and data management, sparking a scramble to adapt, a Reuters examination found.

That’s driving business for AI startups that help companies slash staffing costs and scale operations — even though many consumers still prefer to deal with a person.

This account of the disruptive changes transforming India’s $283 billion IT sector is based on interviews with 30 people, including industry executives, recruiters, workers and current and former government officials. Reuters also visited two AI startups and tested voice and text chatbots that handle increasingly sophisticated customer interactions in human-like ways.

Rather than pump the brakes as the technology threatens jobs built on routine tasks, the country is accelerating, wagering that a let-it-rip approach will create enough new opportunities to absorb those displaced, Reuters found. The outcome of India’s gamble carries weight far beyond its borders — a test case for whether embracing AI-driven disruption can elevate a developing economy or render it a cautionary tale.

The global conversational AI market is growing 24% a year and should reach $41 billion by 2030, consultancy Grand View Research estimates.

India — which relies on IT for 7.5% of its GDP — is leaning in. In a February speech, Prime Minister Narendra Modi said “work does not disappear due to technology. Its nature changes and new types of jobs are created.”

Not everyone shares Modi’s confidence in India’s preparedness. Santosh Mehrotra, a former Indian official and visiting professor at the University of Bath’s Centre for Development Studies, criticized the government for a lack of urgency in assessing AI’s effects on India’s young workforce. “There’s no gameplan,” he said.

Business process management employs 1.65 million workers in call centers, payroll, and data handling in India. Hiring has plummeted due to increased automation and digitalization, despite rising demand for AI coordinators and process analysts, said Neeti Sharma, CEO of staffing firm TeamLease Digital.

Net headcount in the segment, which represents one-fifth of IT output, grew by fewer than 17,000 workers in each of the past two years, down from 130,000 in 2022-2023 and 177,000 in 2021-2022, TeamLease Digital figures show.

Reuters spoke to three current and five former customer-service workers, who described increasing job insecurity and integration of AI, including tools that suggest responses and bots that handle nearly all routine queries autonomously.

Megha S., 32, was earning $10,000 a year at a Bengaluru-based software solutions provider. She said she was laid off last month, just before India’s festive season, as the company moved to implement AI tools to review the quality of sales calls.

“I was told I am the first one who has been replaced by AI,” said Megha, who spoke on the condition that her full name and former employer not be identified. “I’ve not told my parents.”

Sumita Dawra, a former labor ministry secretary who oversaw an Indian government taskforce on AI’s impact on the workforce before retiring in March, said while the technology offered productivity gains that would lead to new jobs, India could consider stronger social security measures, such as unemployment benefits, to help those displaced during the transition.

However, a senior Indian official told Reuters the government believed AI would ultimately have little impact on overall employment. India’s IT and labor ministries, and Modi’s office, didn’t respond to requests for comment.

AUTOMATION GOLD RUSH
Besides AI, factors clouding the outlook for India’s IT sector include US tariffs; a proposal by a US lawmaker for a 25% tax on firms using foreign outsourcing services; and President Trump’s $100,000 fee on new H-1B visas, which are widely used by tech firms to sponsor Indian workers.

Investment bank Jefferies predicted in September that India’s call centers would face a revenue hit of 50% — and around 35% for other back-office functions — from AI adoption over the next five years.

That would spell near-term job losses in India, which accounts for 52% of the global outsourcing market.

“The biggest impact is going to be on young students coming out of college,” said Pramod Bhasin, who in the 1990s established India’s first call center with 18 employees for GE Capital, where workstations were partitioned by saris strung from the ceiling.

In the longer run, India could transition from “back office” to the world’s “AI factory” by capitalizing on demand for AI engineers and automation deployment, said Bhasin, who went on to found IT services firm Genpact.

One beneficiary of that demand is LimeChat, which Reuters visited in August. Gupta, the co-founder, said his developers and engineers have helped automate 5,000 jobs across India. The company’s bots handle 70% of customer complaints for its clients, and it plans to achieve 90-95% within a year, he said.

“If you’re giving us 100,000 rupees per month, you are automating the job of at least 15 agents,” said Gupta. At that price — about $1,130 — the service costs roughly the same as three customer-care staff, he said.

LimeChat’s sales soared to $1.5 million in 2024 from $79,000 two years earlier, regulatory disclosures show. Last year, the firm began integrating Microsoft’s Azure language models and algorithms in a partnership to launch a new e-commerce chatbot.

Among Gupta’s clients is Indian ayurvedic products firm Kapiva, which has deployed a LimeChat bot for customer interactions over WhatsApp.

Keying in a prompt — “What kind of diet should I have to reduce weight?” — yielded an AI meal-plan creator. A follow-up query in English and Hindi about how a slimming juice differs from another item was also answered, with the chatbot eventually sharing links to Kapiva products with a smiling emoji. Kapiva didn’t respond to Reuters questions.

LimeChat’s rivals include Reliance, the conglomerate chaired by Mukesh Ambani, which acquired Indian startup Haptik in 2019.

Haptik says it offers “AI agents that deliver human-like customer experiences” that cost $120 and can cut support costs by 30%. Revenue skyrocketed to almost $18 million last year from less than $1 million in 2020, disclosures show.

Haptik promoted a webinar in September by posing the question: “What if you had a full-time employee who never sleeps and costs just 10,000 rupees?”

“We are seeing a huge shift,” Haptik product manager Suji Ravi said in the webinar, which Reuters reporters attended. “Brands are not investing in human agents and they want to deploy AI agents.”

For LimeChat client Mamaearth, an Indian personal-care brand, the main attraction of AI chatbots is scalability, said Vipul Maheshwari, head of product and analytics at parent firm Honasa Consumer HONA.NS.

“Providing good customer support is make or break for us,” he said. “But can we infinitely scale my customer support team? Absolutely not.”

The chatbot used by Mamaearth could go beyond simple assistance like order tracking, and help users with queries such as recommending the right products during pregnancy or, in some cases, handle an agitated customer, Maheshwari said.

COFFEE WITH NEHA
The promise and perils of AI are evident at The Media Ant. The Bengaluru-based advertising agency cut 40% of its workforce to about 100 over the past year and vacated space in another building to save on rent, said founder Samir Chaudhary.

The firm eliminated 15 salespeople, replacing them with AI bots that identify leads and send emails to prospective customers, Chaudhary said. A six-member call center was replaced with a voice agent called Neha that speaks in near-flawless, Indian-accented English.

When a Reuters reporter asked Neha about advertising on YouTube, she sought details about the budget and target markets, noted the requirements, and ended the conversation cheerfully: “I will email you the details … have a great day.”

“Ask her out for a coffee and she will laugh it off,” Chaudhary said.

Yet the race to embrace AI isn’t always smooth for companies.

Take Sweden’s Klarna. Chatbots helped the fintech firm cut thousands of jobs last year, but its CEO told Reuters in September the company is now “trying to course correct” and use the technology to improve products rather than reduce costs.

Chatbots have limitations. While most generic e-commerce-related queries posed by a Reuters reporter were handled well by LimeChat bots, some stumped them.

When LimeChat client Knya’s bot was asked for proof of its claim that a million medical professionals trust its products, such as its stethoscopes, it replied: “I am sorry, I don’t have enough information to answer your question.” Knya didn’t respond to a request for comment.

Customer surveys show chatbots are still disliked by many.

An August 2024 EY survey of 1,000 Indian consumers found 62% made purchases influenced by AI recommendations, compared with 30% globally. Yet, “the desire for a human connection remains strong,” EY noted, with 78% preferring online platforms that provide human support.

LimeChat’s Gupta, though, said well-trained AI agents could resolve queries faster than humans. He said many standard bots pass conversations to a human agent when they encounter angry customers: “You need a very small number of people to just handle negative experiences.”

FROM JAVA TO AI
In the 1990s and 2000s, India’s tech boom fueled rural-to-urban migration. Cities like Bengaluru became outsourcing hubs as domestic firms, including Tata Consultancy Services, Infosys and Wipro, grew into global juggernauts.

That expansion trickled through to Ameerpet, a Hyderabad neighborhood where university graduates fill classrooms to learn IT skills and earn certifications for tech jobs.
Ameerpet’s training centers traditionally offered courses in Microsoft Office and programming languages like Java. Visiting in April, Reuters found these centers are increasingly focused on AI training.

Outside one, Quality Thought, a banner featured a robot overlooking a globe with the letters “AI.”

The center was offering a nine-month course in AI data science and prompt engineering for about $1,360, more than double the price of a traditional web-development program.

“Recruiters are asking for students with basic AI skills,” staffer Priyanka Kandulapati said. “We are going to streamline our courses even further to suit the demand.”

In a discussion with startup founders last month about the pace of change, venture capitalist Vinod Khosla, who co-founded Sun Microsystems, offered a stark view of the future for India.

“All IT services will be replaced in the next five years,” he said. “It’s going to be pretty chaotic.” — Reuters

TOKYO — Japan’s parliamentary scheduling committee could not agree on holding a vote to select the next prime minister on Oct. 21, Kyodo news agency reported on Wednesday.

The ruling Liberal Democratic Party (LDP) proposed the date, but opposition parties disagreed, citing ongoing discussions across parties, Kyodo reported. The committee will continue to discuss the schedule, it added.

The LDP chose Sanae Takaichi as its new leader earlier this month after Prime Minister Shigeru Ishiba decided to resign both as LDP president and premier following a series of election losses.

But Ms. Takaichi’s path to becoming Japan’s first female prime minister has become murkier after the LDP’s longstanding partner Komeito left the coalition last week, opening up the possibility of a premiership from an opposition party.

On Wednesday, the leaders of three major opposition forces — Constitutional Democratic Party (CDP), Democratic Party For the People (DPFP) and Japan Innovation Party — are due to meet for ongoing discussions on whether to band together to support a common candidate for the premiership.

The CDP, Japan’s biggest opposition party, has suggested DPFP head Yuichiro Tamaki as a candidate to challenge Takaichi.

Ms. Takaichi is separately meeting one-on-one with the heads of CDP, DPFP and the Japan Innovation Party.

The LDP has lost its majority seat in lower and upper houses in elections since last year but remains the largest party in both chambers. — Reuters

SINGAPORE/BEIJING — China’s Communist Party meets this month to map a five-year vision that prioritizes high-tech manufacturing in its quest to upgrade its sprawling industries and project global power as its rivalry with the US intensifies, analysts say.

Known as a plenum, the meeting is also likely to pledge strong measures to lift household consumption and curb deep, historical supply-demand imbalances that threaten long-term growth in the world’s second-largest economy.

The two goals are decades old and pull in opposite directions, a policy challenge that has become acute now with US-China tensions worsening, making it hard for Beijing to pivot to demand-side policies, analysts say.

Industrial prowess demands maintaining the status quo of channeling state resources to producers, while boosting consumption requires funds be redirected to households, leaving less for business and government investment.

FACTORIES VS CONSUMERS
China’s growth over the past decade was driven by the pursuit of the first goal at the expense of the second. But this action is now fanning deflationary pressures and creating unsustainable debts.

The intensifying rivalry between the US and China, underlined by US President Donald J. Trump’s renewed threats of triple-digit tariffs last week, has complicated matters for policymakers in Beijing, analysts say.

It’s a choice to prioritize great power competition over the compelling need to address domestic growth imbalances.

China’s next five-year plan, the closely watched policy document that the Oct. 20-23 plenum will produce for parliamentary approval in March, will “definitely emphasize, and re-emphasize, support for high-tech research and industrial development,” said Chen Bo, senior research fellow at the National University of Singapore’s East Asian Institute.

“In terms of a country’s hard power, manufacturing is still a top priority,” Mr. Chen said. “When conflict arises, what ultimately matters is manufacturing, not services.”

A speech by President Xi Jinping published by Communist Party magazine Qiushi in July said the world was going through changes not seen in a century, which made “technological revolution and major-country competition increasingly intertwined.”

Mr. Xi called on the nation to secure the “strategic high ground” in the global tech race.

China now leads in industries such as electric vehicles, solar or wind and is leveraging its dominance of rare earths production with export controls before potential trade talks between Mr. Trump and Mr. Xi later in October.

Apart from a few high-end sectors, such as aircraft or advanced semiconductors, its supply chains are largely domestic. With the West aiming to re-industrialize and re-arm after Russia’s invasion of Ukraine and amid growing tensions over Taiwan and the South China Sea, the stakes are too high for Beijing to even contemplate slowing down on that front.

“If you do not develop high-end industries, you will be subject to others in the future,” said Guo Tianyong, professor at the Central University of Finance and Economics in Beijing, warning, however, that China needed a better policy balance.

CRACKS ARE EMERGING
Morgan Stanley analysts said they expect post-plenum statements to deliver a “tech- and supply-driven framework, with incremental focus on social welfare.”

Consequently, “decisive reflation remains elusive in 2026,” they added.

Beneath the envy-worthy headline growth, the past five-year cycle has been anything but smooth sailing for the economy — factory gate deflation is becoming entrenched, adding to a property crisis, a municipal debt scare, endemic industrial overcapacity, and record youth unemployment.

A generation who studied for highly skilled and well-paid service sector jobs, which a consumption-driven growth model had better chances of creating, faces limited opportunities. “If you only rely on external demand and domestic demand is not working, then you will have unemployment problems and also deflation,” said Larry Hu, chief China economist at Macquarie.

“If it continues like this for one or two years, it’s still okay. But in the long run, it will definitely be a problem.”

Mr. Hu expects China to get serious about stimulating consumption if and when external demand shrinks enough to threaten growth targets.

EMPTY PROMISES ON CONSUMPTION?
The 2026-2030 blueprint will be China’s 15th five-year plan since it adopted Soviet-style quinquennial policy formulation cycles in the 1950s.

The 14th promised to “fully leverage the fundamental role of consumption in stimulating economic development.” The 13th pledged that “the contribution of consumption to economic growth will continue to grow.”

Yet Chinese households — their wealth eroded by the property crisis and confidence shattered by strict pandemic curbs — still prefer saving over spending, prompting calls to reform labor markets, taxes, state firms, land rights and welfare.

Analysts say China can muddle along with its contradictory goals by tilting industrial support toward tech research and away from capacity expansion, while gradually building on its incipient efforts to strengthen the welfare system.

Over the past year, Beijing has rolled out consumer goods subsidies, childcare benefits, and small pension increases. A recent top court ruling that makes social insurance contributions mandatory for both employers and workers lays the groundwork for stronger welfare over the longer term.

One policy adviser, asking for anonymity to discuss sensitive topics, said benefits will likely rise further in the next five years, with lower pensions increasing faster than higher ones.

But improvements “won’t be particularly substantial,” even though “everyone recognizes the issue of insufficient demand,” the adviser said, adding that the small social security budget and tight local government finances limit policy options.

After the property sector’s downturn, the adviser added, “we are unable to find new demand drivers.”

Dan Wang, China director at Eurasia Group, expects the five-year plan to “focus more on people’s livelihood, including social security, healthcare systems, and possibly more support and protection for low-income groups.”

But, she says, such language should “absolutely not” be read as a paradigm shift.

“In a now very typical Marxist country,” Ms. Wang said, “it’s all about production.” — Reuters