The prospect of a post-AI economy, which must actively work with the inroads of artificial intelligence in myriad economic dimensions, can be both a boon and a bane. Under Prime Minister Narendra Modi, the Union Government of Bharat has orchestrated a series of strategic interventions to position Bharat at the forefront of technological innovation and economic advancement. Through a blend of policy reforms, infrastructure development, and ecosystem nurturing, the Government has endeavoured to harness the transformative potential of AI across various sectors, fostering sustainable growth and inclusive development.
At the heart of India’s AI journey lies the National AI Strategy, a multifaceted roadmap unveiled in 2018 outlining the nation’s ambitions to harness AI for socio-economic progress. The Government has developed a comprehensive strategy to bolster India’s AI research efforts, proposing a two-tiered structure to address the nation’s aspirations in this domain. The first tier, the Centre of Research Excellence (CORE), is designed to deepen our understanding of existing core research while pushing the boundaries of technology by creating new knowledge. The CORE aims to serve as a hub for cutting-edge research, fostering collaborations between academia, industry, and government to drive innovation in AI. The second tier comprises the International Centres of Transformational AI (ICTAI), tasked with developing and deploying application-based research. These centres will focus on translating AI advancements into practical solutions that address real-world challenges across various sectors. A key feature of the ICTAIs is their emphasis on private-sector collaboration, recognising the industry’s pivotal role in driving AI-driven innovation and commercialisation. Together, these initiatives underscore the government’s commitment to fostering a vibrant AI research and development ecosystem, positioning India as a global leader in artificial intelligence.
Central to this strategy is creating a robust digital infrastructure capable of handling vast amounts of data and facilitating the development and deployment of AI-driven solutions across sectors. Initiatives such as the National Data and Analytics Platform (NDAP) and the creation of Data Empowerment and Protection Architecture (DEPA) are pivotal, providing the foundational infrastructure for data-driven innovation while ensuring data privacy and security.
Various dimensions and parameters of human resource development can benefit from the incorporation of AI-based solutions as well as post-AI strategies. AI-powered solutions are poised to revolutionise diagnostics, treatment protocols, and healthcare delivery mechanisms in healthcare. The Modi Government’s flagship program, the National Health Stack, integrates AI algorithms for predictive analytics, personalised medicine, and healthcare resource optimisation. By leveraging data from electronic health records, medical imaging, and wearable devices, AI-enabled healthcare systems can enhance early detection, improve patient outcomes, and optimise resource allocation, thereby augmenting the efficiency and efficacy of India’s healthcare ecosystem. AI holds immense promise in enhancing productivity, resilience, and sustainability in agriculture, where a major section of India’s population is engaged. The National AI for Agriculture Mission, launched by the government, aims to leverage AI-driven technologies such as satellite imagery, IoT sensors, and predictive analytics to optimise crop management, mitigate climate risks, and improve farm yields. By providing farmers with actionable insights on soil health, weather patterns, and crop diseases, AI-enabled agriculture systems empower farmers to make informed decisions, optimise resource usage, and enhance agricultural productivity. Education is another domain where AI reshapes traditional paradigms, fosters personalised learning experiences, and expands access to quality education. The Modi Government’s National Education Policy (NEP) 2020 emphasises the integration of AI and technology into the education ecosystem, promoting adaptive learning platforms, intelligent tutoring systems, and data-driven pedagogies. Initiatives like SWAYAM and DIKSHA leverage AI algorithms to tailor educational content to individual learning preferences, optimise curriculum delivery, and provide equitable access to educational resources across diverse socio-economic backgrounds. In parallel, the Modi government has taken proactive measures to nurture a vibrant ecosystem for AI research, innovation, and entrepreneurship. Establishing AI research institutes, centres of excellence, and innovation hubs across the country catalyses collaboration between academia, industry, and government, fostering a culture of innovation and knowledge exchange. Initiatives such as the Atal Innovation Mission and Startup India provide critical support and funding to AI startups, incubating disruptive technologies and driving the proliferation of AI-driven solutions across sectors.
AI and Bharat in 2024
In 2024, India is experiencing a surge in AI adoption across various sectors. Major IT companies like Infosys, TCS, and Wipro are scaling back campus hiring to develop in-house AI capabilities for global clients. Bhavish Aggarwal’s “Krutrim” became India’s first AI unicorn, underlining the importance of addressing data challenges, as highlighted by Nandan Nilekani. Government bodies, including the Chief Economic Adviser and the Prime Minister’s Economic Advisory Council, acknowledge AI’s potential impact on trade and employment and propose regulatory frameworks. Not all of this would be rosy, though. The IMF predicts AI’s disruption of white-collar jobs, reflecting global concerns about its economic impact. While innovations like Rabbit r1 and Humane AI Pin showcase AI’s rapid progress, with figures like Elon Musk envisioning a future with humanoid robots that are inherently generative, deepfake technology raises concerns about its potential influence on elections, prompting discussions on regulation and vigilance. AI-generated content in social media and the film industry has caught the public imagination, with even news anchors now being AI-based on channels such as Aaj Tak. Paytm and PhonePe leverage AI algorithms to detect fraudulent transactions and enhance cybersecurity measures. Companies like Flipkart and Amazon use AI algorithms to analyse customer behaviour, predict purchasing patterns, and optimise product recommendations, leading to higher conversion rates and customer satisfaction. Transportation and logistics companies like Delhivery and Rivigo are using AI to optimise delivery routes, reduce transit times, and minimise fuel consumption, leading to cost savings and operational efficiency gains, while educational startups like Byju and Vedantu are leveraging AI algorithms to personalise learning experiences, assess student performance, and provide targeted remedial interventions, improving learning outcomes for students across the country.
Various grassroots-level entities are trying to spur the transformational trajectory of Bharat using AI. Karya, an organisation rooted in social impact, spearheads the creation of diverse datasets in Indian languages to train AI models, thereby fostering job creation predominantly in rural regions. Originally a Microsoft Research project established in Bengaluru in 2017, Karya now operates independently, utilising Microsoft Azure infrastructure and AI services to develop high-quality datasets. Focusing on empowering marginalised communities, particularly rural women, Karya pays workers approximately $5 per hour and collaborates with over 200 nonprofits, aiming to reach 100 million individuals by 2030. By democratising access to AI technologies and bridging language barriers, Karya endeavours to integrate marginalised populations into the digital economy, ensuring that no one is excluded based on language or socio-economic status. Another such initiative is Wadhwani AI, a nonprofit institution founded by Romesh and Sunil Wadhwani, which is dedicated to harnessing artificial intelligence (AI) for social impact in India. Since its inception in 2018, Wadhwani AI has pioneered AI-powered solutions across healthcare, agriculture, and education. The organisation’s research spans cutting-edge AI technologies, including generative AI and large language models (LLMs), focusing on practical applications. Wadhwani AI’s approach involves fine-tuning language models on custom datasets and integrating generative AI techniques into clinical decision support systems and disease surveillance platforms. Through strategic collaborations with governmental bodies, Wadhwani AI establishes AI centres of excellence and deploys specialised solutions like CottonAce, a mobile application aiding cotton farmers in pest management. With a commitment to data privacy and efficacy, Wadhwani AI leverages government-collected longitudinal data and partners with NGOs to gather ground-level insights. Furthermore, the institution extends its AI expertise to education, climate change, and genomics sectors, forging impactful collaborations with UNICEF and state governments to drive innovation and inclusive development across India.
The Economic Dimension of Kritrim Buddhimatta
Yuval Noah Harari talks of the immense impact that AI will have on the economic dimension of humanity, both positively and negatively mocratisation of access to AI (by governments as well as the likes of Karya and Wadhwani AI) is crucial, with affordability and relevance to the Indian context being key factors. While the previous era focused on providing access through affordable devices and data, the current emphasis is on infusing intelligence into this accessibility. It’s important to recognise that the impact of AI will vary across different domains in a highly nonlinear and intersectional manner. While sectors like education may radically transform, others will require time for deep tech advancements to fully leverage AI’s potential. The evolution towards per capita AI consumption as an indicator of development reflects the growing significance of AI in shaping societal progress. As subject matter experts continue to build applications harnessing AI capabilities, the landscape of technological advancement in India is poised for significant shifts. During her Union Interim Budget 2024 address, Finance Minister Smt. Nirmala Sitharaman unveiled measures to equip India’s youth with skills relevant to Industry 4.0. The government focuses on introducing contemporary courses covering AI coding, IoT, Robotics, Mechatronics, 3D printing, and various soft skill programs. The Future Skills Prime initiative is a collaborative effort involving NASSCOM, MeitY, and the Government of India, aimed at nurturing the nation’s young talents to prepare them for a brighter future. Understanding the economic impact of artificial intelligence (AI) requires careful consideration of several key questions going forward:
As AI increases automation in producing goods and services, its effects on economic growth become paramount.
Reconciling the introduction of AI with the historical constancy in growth rates and capital share throughout much of the twentieth century raises significant inquiries about the prospects for the twenty-first century.
Applying AI and automation to generate new ideas adds another layer of complexity to this analysis. The potential for AI to drive substantial increases in growth rates or even lead to a technological singularity demands examination under various conditions and plausibility assessments. Understanding the links between AI and economic growth necessitates exploring firm-level considerations, including market structure and innovation incentives.
The internal organisation of firms in response to AI advancements and their implications further enrich this discourse on the intersection of AI and economic dynamics.
We need to update our economic measurement tools as AI and its complementary technologies increasingly contribute to our intangible capital stock. Traditional metrics like GDP and productivity may become more challenging to measure and interpret in this evolving landscape. Successful companies today may not require substantial investments in physical infrastructure but possess valuable intangible assets that are difficult to replicate. The significant market values attributed to AI development and implementation companies indicate investors’ belief in their real value. If efficient, financial markets should accurately value firms based on their present value of risk-adjusted discounted cash flows, including tangible and intangible assets.
Moreover, the effects of AI on living standards could surpass the benefits investors anticipate, though these benefits may not be equally distributed among all individuals.
Economists are well-suited to contribute to research aimed at documenting and understanding the often intangible changes associated with AI and its broader economic implications. There may be a need to formulate a comprehensive Kritrim Buddhimatta Vikās Sūchkānk (Artificial Intelligence Development Index) as well as a Bharat.ai Annual Policy Report for the nation, which gives us an overview and a more granular understanding of the tangible and intangible effects and realities of artificial intelligence in the country. Recent studies show that a nonlinear relationship exists between artificial intelligence (AI) and unemployment, influenced by inflation levels. When inflation is low, AI usage tends to improve employment by compensating wage increases with growth and new job creation. However, this positive effect diminishes as inflation rises. Interventions to promote AI adoption during high inflation periods are ineffective due to the economy’s self-regulating mechanisms regarding unemployment levels.
Various policy solutions have been proposed to address challenges posed by increased AI and robotics use. These include establishing AI-specific commissions, implementing universal basic income, and enhancing data portability. When evaluating these options, it’s crucial to compare their effectiveness in addressing AI-related issues relative to existing policies.
Considering AI’s impact on the economy, while it has shown significant progress in areas like image recognition, its overall effect on economic productivity remains limited. Thus, traditional safety net programs may better handle transitional disruptions caused by AI, especially given resource constraints at the Union and state levels. Recently, Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), said,
“Sixty percent of jobs in advanced economies over a foreseeable future are going to be impacted by artificial intelligence. If you’re lucky, artificial intelligence will enhance your productivity, make your job more enjoyable, and very likely better paid. If you’re unlucky, your job is gone.”
Advances in AI technology prompt policymakers to consider two primary types of policy responses: those aimed at shaping the spread or diffusion of AI and those intended to manage the outcomes resulting from its diffusion. Regarding diffusion, policymakers often focus on areas such as privacy, trade, and liability to regulate and guide the spread of AI while upholding societal values. As AI becomes more pervasive, it inevitably brings about implications for various aspects of society, including employment, income inequality, and market competition. To address these consequences, policymakers may need to formulate strategies related to education, social welfare programs, and antitrust measures. The challenge lies in finding a delicate balance between fostering AI innovation and safeguarding broader societal interests and well-being. According to McKinsey’s estimates, the integration of Generation AI (GenAI) can contribute up to $4 trillion each year to the global economy. This figure, however, is believed by many to be conservative, suggesting that the actual impact could be even greater. Specifically, by 2030, it is projected that GenAI could contribute approximately $1.5 trillion to India’s Gross Domestic Product (GDP). As a result, there is a noticeable influx of investments into this burgeoning sector. According to a PwC report, AI could contribute up to $957 billion to India’s economy by 2035. The National Association of Software and Service Companies (NASSCOM) estimates that India’s AI revenue could reach $7.7 billion by 2025, growing at a 45.2 per cent CAGR. According to Michael Spence, Nobel laureate in Economics 2001, India’s entrepreneurial landscape is adept at addressing local challenges. Thus, the country is poised to benefit rather than lose as it embraces generative artificial intelligence. He emphasised that the shift to generative AI will not necessarily favour Western economies over developing nations. Spence highlighted the importance of experimentation and problem-solving in this evolving landscape, suggesting that the benefits of AI adoption will vary across borders.
The sky is just a limit to be crossed for Bharat, as we aim to synergise our human resource capital with the power of artificial intelligence. Data privacy, ethical AI deployment, and equitable access to AI-driven services remain pressing concerns that necessitate careful deliberation and proactive policy interventions. Moreover, technological advancement demands continuous upskilling and reskilling initiatives to equip India’s workforce with the requisite skills and competencies for the digital age. In conclusion, the Modi government’s initiatives to propel India’s transition to a post-AI economy exemplify a visionary approach to harnessing technology for inclusive growth and sustainable development. By fostering a conducive ecosystem for AI innovation, investing in digital infrastructure, and prioritising human-centric AI solutions, the government is laying the foundation for a future where India emerges as a global leader in AI-driven innovation and economic prosperity. As India navigates the complexities of the Fourth Industrial Revolution under the able leadership of Shri Narendra Modi, sustained collaboration and collective action will be paramount in realising the full potential of AI to shape a brighter tomorrow for Bharat.ai.