Artificial Intelligence (AI) has rapidly transformed the Indian labour market by influencing employment patterns, workforce structure, productivity, and skill requirements across multiple sectors. The present study examines the impact of AI on employment opportunities, automation, labour market transformation, and digital skill development in India using descriptive and analytical research methodology based on secondary data collected from government reports, industry surveys, research journals, and policy documents. The findings reveal that the Information Technology sector recorded the highest AI adoption rate of 78% and generated approximately 2,10,000 AI-related jobs, followed by Banking, Manufacturing, Healthcare, Retail, and Logistics sectors. The study highlights that AI-driven automation has significantly reduced repetitive and low-skilled tasks, with nearly 38% of low-skilled urban jobs facing automation risks. Simultaneously, AI has created new employment opportunities in data science, machine learning, robotics, cybersecurity, cloud computing, and prompt engineering. The research further indicates that around 44% of India’s workforce requires reskilling to remain employable in AI-driven industries, while online AI course enrolment reached nearly 12.5 million in 2025. However, challenges such as digital inequality, wage disparities, limited rural access to technology, and inadequate technical education continue to hinder inclusive labour market development. The study concludes that continuous investment in digital infrastructure, vocational education, and workforce reskilling programs is essential for ensuring sustainable and balanced employment growth in India’s AI-driven economy.