AI Spending Rises as Indian CEOs Flag Talent Shortage as Top Risk

Investment in artificial intelligence by Indian companies is rising, while a shortage of skilled manpower remains a central concern. 

The KPMG 2025 India CEO Outlook reports that 57 percent of CEOs plan to allocate 10–20 percent of their budgets to AI in the next year. At the same time, 34 percent identify a lack of workforce skills aligned to AI needs as a major barrier. 

This tension sits within an employment context where assessments show that only around 42 percent of graduates meet industry expectations. Persistent gaps across technical and operational roles continue to strain hiring pipelines. 

Indian enterprises face rising AI adoption costs on one side and an underprepared workforce on the other. The issue now shapes business planning, workforce budgets and operational execution across sectors.

Rising AI Investment Amid Business Uncertainties

The KPMG survey covers large companies across manufacturing, financial services, energy, technology and consumer sectors. Their responses indicate increased capital allocation for AI, with over half planning to channel 10–20 percent of their annual budgets toward these systems. A majority expect measurable returns within one to three years, tied to goals such as improving decision-making, automating routine steps, reducing processing time and strengthening operational reliability.

Cybersecurity, risk systems and productivity improvements appear alongside AI as priority areas. These choices reflect ongoing pressure on Indian companies to manage compliance demands, sustain margins and improve operational throughput. AI is now treated as a tool to support these tasks rather than an experimental concept. Large companies are pursuing scale, speed and better controls, and AI funding has moved from discretionary to core budgeting.

Talent Shortage Undermines Execution Capacity

The same survey identifies a structural constraint. About 34 percent of CEOs cite a gap between existing skills and those needed for AI-related work. Another 26 percent report difficulty finding candidates who can combine technical capability with problem-solving and collaborative ability.

These results align with national employability studies showing that less than half of graduates meet industry standards. The shortfall spans data, software, engineering, manufacturing and energy-linked roles. Independent estimates show the country facing a skill deficit running into tens of millions across the next few years. Companies in IT, manufacturing, infrastructure and logistics continue to report hiring challenges, and talent short supply increases recruitment cycles and training costs.

For firms increasing AI spend, this limitation has operational consequences. Systems may not integrate smoothly into existing processes if the workforce is not prepared to handle new tools, manage workflows or maintain quality. Companies attempting to retrain staff face the added issue of limited baseline capability. External hiring remains competitive due to the small pool of job-ready talent.

Workforce Strategy Under Pressure: HR Faces Tough Choices

Human resources departments now face rising pressure to revise training frameworks. The KPMG report notes that 91 percent of CEOs support investment in training and lifelong learning, and 73 percent plan to reassess existing training structures. Indian companies with large legacy workforces must redesign roles, create clearer skill paths and build structured programs that help teams adapt to AI-supported tasks.

Manufacturing, utilities and infrastructure companies face added complexity due to long-standing processes and fixed operational routines. Moving employees into AI-enabled roles requires structured training, revised reporting lines and tighter coordination between business and HR functions. Regional surveys indicate that these issues are widespread. Firms across several industrial clusters report difficulty securing skilled talent, adding pressure to workforce planning.

Hiring alone will not solve the shortfall. Companies require sustained investment in skill-building across mid-level and frontline roles. The integration of AI-enabled systems depends on employees who can absorb new tasks, manage quality and adapt to revised operational controls.

What Indian Firms Must Address Now

The data shows a clear structural issue. Companies are increasing AI spending at a faster rate than the workforce can support. 

This gap limits the impact of technology investments and raises operational risk. Indian enterprises need to strengthen internal capability through focused training, clearer job structures and consistent investment in relevant skill development. 

AI adoption depends on people who can operate and manage these systems. Without workforce capability, technology outlay remains under-used. Indian business leadership must concentrate on building skills that match the scale of their AI spending.