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At war with a AI major at about round 80 (victory level at 49.1 and just need to take more non-aligned territory for the win...). Pictured is city hex with SHQ (upper left corner of city hex) in it - have taken 4 or 5 zones from the major and the major only has 2 left. The major has raised what appears to be 274+ MG battalions and a handful of armor battalions. By my calculation, that is in excess of 275,000 population required to raise all of this 'mess'. It does appear that the AI doesn't rebuild battalions with replacements - it merely creates new battalions as existing are destroyed.

So... does the AI's raising of forces deduct from the population of zones?

I was attempting to use an attrition strategy and constantly sweep the agriculture area around the city hex with armored forces - then pull back and allow the AI to 'refill' the agric. hexes with low readiness/low entrenchment forces and repeat sweep process. It doesn't appear that the population of the zone is being reduced by the constant creation of new battalions to replace those totally destroyed by my armored sweeps.

As far as I know they are being deducted from population.
But I do not know if the AI has to recruit first and thus could end up with a huge stockpile?

Kept a game going to test some things and in the end the AI crippled it's own economy because it kept sending troops into my defenses and switched to using robots.

With enough recon/spies you could check the city pop or graphs?

Edit: The major could be sending recruits from the other zones it has left too?

The game illustrated by the first post was actually my second experience of imposing a VERY substantial kill ratio against a major and not seeing any observable reduction in zone city population (Free Folk sources were depleted). All zones had 3+ spies and hex recon (especially city hex) never fell below 100 - I had recon aircraft flying over the city hex every 3rd-4th round to update population and asset holdings thus providing 400+ recon levels during those rounds where I recorded population and assets present.

In the first experience, I had the capitol zone isolated from the remainder of the major's zones (intel picked up the creation of a 2nd SHQ in non-isolated zone); and the isolated capitol zone was able to consistently churn out brigade after brigade without any reduction in zone population (I was attempting to impose an attrition strategy before assaulting the city hex). This is when I began to think that one of the AI 'cheats' was NOT to impose a population reduction upon creation of military forces (or 'recruiting' population into a 'holding pool').