<h1>AI adoption and Indian IT sector's future: urges bottom-up, domain-specific models and governance to manage labour and market risks</h1> A report warns of concentrated control over critical AI inputsdata, compute, and foundational modelscreating market power and technological dependence, which risks hollowing out the domestic IT sector and erecting barriers to entry; consequence: policy must address market concentration to preserve domestic value capture. It urges prioritising application-specific, small models over pursuit of frontier foundational models given scarce compute and fiscal limits; consequence: resources should be allocated to domain-specific systems aligned with economic priorities. It highlights labour risks from rapid AI deployment and the need for paced diffusion and governance including incentives for data localisation; consequence: calibrated adoption and institutional frameworks are required to manage displacement and distribute value.