AI's Impact on India's BPO Sector: Economic Advisor Warns of Potential Slowdown

AI could slow BPO sector growth: Chief Economic Advisor Nageshwaran

He noted that within the next decade, India is poised to become the world's third-largest economy and will benefit significantly from its demographic dividend. However, Nageswaran also acknowledged potential challenges posed by AI, particularly for India's Business Process Outsourcing (BPO) sector. He stated, "The short-term challenge of generative AI could slow BPO sector growth, affecting customer services. It is possible that the jobs related to BPO will be under threat whereas AI may actually turn out to be a booster." Furthermore, Nageswaran also pointed out that the emergence of AI might reduce annual productivity growth by approximately 0.3 percentage points in the coming years. This indicates a potential short-term dip in productivity as industries adapt to new technologies. Despite these challenges, Nageswaran added that the long-term potential of AI is promising. The broader adoption of AI could lead to significant improvements in critical areas such as healthcare and education, thereby enhancing human capital. The economic survey presented in the Parliament by finance minister Nirmala Sithraman says in the medium term Indian economy can grow at a rate of 7 per cent. The economic survey stated, "In the medium term, the Indian economy can grow at a rate of 7 per cent plus on a sustained basis if we build on the structural reforms undertaken over the last decade. This requires a tripartite compact between the Union Government, State Governments and the private sector." Achieving a sustained growth rate of over 7 per cent will require a tripartite compact between the Union Government, State Governments, and the private sector. India's financial sector is undergoing critical transformations. During FY24, primary capital markets facilitated capital formation of Rs 10.9 lakh crore, accounting for approximately 29 per cent of the gross fixed capital formation of private and public corporates in FY23. It further adds India faces a unique blend of opportunities and challenges amid global trends such as geo-economic fragmentation, a push for self-reliance, looming climate change, the rise of technology, and limited policy space. (ANI)

'AI could slow BPO sector growth': Chief Economic Advisor V Anantha Nageswaran

He mentioned that within the next decade, India is set to become the world's third-largest economy and will greatly benefit from its young population. However, Nageswaran also recognised potential challenges posed by AI, especially for India's Business Process Outsourcing (BPO) sector. "The short-term challenge of generative AI could slow BPO sector growth, affecting customer services. It is possible that the jobs related to BPO will be under threat whereas AI may actually turn out to be a booster," he said. Nageswaran also noted that AI might reduce annual productivity growth by about 0.3 percentage points in the coming years, indicating a possible short-term dip as industries adjust to new technologies. Despite these challenges, he said AI's long-term potential is promising. Wider use of AI could greatly improve important areas like healthcare and education, enhancing human capital. The economic survey presented in Parliament by finance minister Nirmala Sitharaman states that the Indian economy can grow at a rate of 7 per cent in the medium term. "In the medium term, the Indian economy can grow at a rate of 7 per cent plus on a sustained basis if we build on the structural reforms undertaken over the last decade. This requires a tripartite compact between the Union Government, State Governments and the private sector," the survey stated. "To maintain a growth rate of over 7 per cent, the Union Government, State Governments, and the private sector must work together. India's financial sector is experiencing significant changes," the report stated. In FY24, primary capital markets helped raise ₹10.9 lakh crore, making up about 29 per cent of the gross fixed capital formation for private and public companies in FY23, the survey added. "Additionally, India faces a unique mix of opportunities and challenges due to global trends like geo-economic fragmentation, the push for self-reliance, climate change, the rise of technology, and limited policy options," the economic survey report stated.

AI may slowdown growth of India's services export: Economic Survey

The survey referred to a report by Capital Economics that discusses this impact on services export growth. "The advent of artificial intelligence casts a huge pall of uncertainty as to its impact on workers across all skill levels - low, semi, and high. These will create barriers and hurdles to sustained high growth rates for India in the coming years and decades. Overcoming these requires a grand alliance of union and state governments and the private sector," the survey report said.