The current advances in artificial intelligence (AI) are transforming the higher education and labour market landscape at a pace that Curriculum, faculty capability, and assessment systems are struggling to keep up with. This chapter attempts to map the current intersection of AI and employability skills in India’s higher education sector and to situate that discussion within the policy framework of the National Education Policy (NEP) 2020, as well as recent industry insights on skill demand. Using secondary data from government publications, industry-academia collaborations, and recent empirical studies, this chapter presents the paradox of rising overall graduate employability in recent years, despite significant numbers of graduates being employed below their qualification levels and skill shortages in India’s AI talent pipeline relative to industry demand forecasts. It suggests that this paradox is a product less of a lack of familiarity with AI tools but rather due to a lack of ecosystem support for translating AI awareness into meaningful and transferable employability skills like critical thinking, adaptability, and working alongside AI. The chapter then discusses three core areas where such a transition is being hindered: growing “AI gap” between institutes with and without access to AI resources, lack of faculty readiness to facilitate AI-enabled learning, and questions around academic dishonesty and ethical AI use in evaluating student performance. Recommending a cohesive approach towards curriculum reform, faculty development, academia-industry collaboration, and equitable infrastructure development linked to NEP 2020’s focus on multidisciplinary, skill-linked, and competency-based education, the chapter ends with a set of key recommendations for administrators, policymakers, and industry players to ensure AI enables equitable graduate employability in Indian higher education. The chapter hopes to make two contributions to the book’s mission of imagining a future-ready, creative, and inclusive India through the lens of higher education. Firstly, by framing AI-enabled employability skills development as a responsibility that must be collectively shouldered by government, academia, and industry rather than siloed into curriculum changes by academia alone. Secondly, by centring equity as a fundamental consideration in shouldering that responsibility.