Economic Survey 2024-25 Highlights AI's Impact on India's Job Market and Economy

Strong Institutions Can Counter AI Job Losses: Economic Survey

Disclaimer: This content generated by AI & may have errors or hallucinations. Edit before use. Read our Terms of use The latest Economic Survey of India (2024-25) discussed the potential for mass unemployment due to AI and advocated for robust institutions and collaborative policymaking to mitigate this threat. The report looks at previous technological revolutions to understand the impact AI can have on the economy and outlines the possible opportunities that AI may open up for India. Omir Kumar, Policy Analyst at the Centre for Responsible AI at IIT Madras commended the report for proactively considering the implications of AI on society and labor markets, taking a holistic approach to AI safety. "Regarding AI's impact on labor, the focus should be on AI augmentation. To achieve this, we need to develop AI solutions that complement the workforce and enhance productivity. Lastly, efforts to upskill the existing workforce will enable them to leverage AI solutions to their full potential," said Kumar. The previous Economic Survey warned of potential job losses by AI, specifically highlighting sectors like customer service, creative sectors, education, and healthcare. The report stated that previous technological revolutions were painful and caused long-lasting damage, as labour was substituted by capital. Many struggled to find new employment, as income inequality rose, and those who were unable to adapt to the technological change saw declining pay and fewer opportunities. As the Industrial Revolution showed, wages often lag behind the productivity gains brought about by technological changes. Workers didn't get to see the benefits of rising profits while those laid off struggled to find employment for decades. "Protracted labour displacement is something that a labour-surplus country like India cannot afford," said the report. It pointed out that, as per the previous Economic Survey, India would have to create an average of 78.5 lakh jobs annually in the non-farm sector by 2030 to cater to the rising workforce. Secondly, most of India's IT sector offers low-value added services, which are a prime candidate for automation. Rising unemployment could also affect consumption patterns, setting the country's economic trajectory off growth. In order to mitigate these risks, the report asks for new "social infrastructure," that can provide the foundations for ensuring that technological progress end ups being a net positive for society. "High-quality institutions act as mediators, ensuring that technological advancements yield broad-based benefits, while weak or absent institutions often exacerbate disparities, resulting in uneven economic and social outcomes. For India to seriously consider the effects of AI, actions will have to focus on strong Institution Building," said the report. It built upon economist Andrew Haldane's work that defined two types of institutions - enabling institutions and insuring institutions. Enabling institutions will impart new training and skills to workers to ensure that they keep up with the demands of the job market. Insuring institutions will provide a soft landing pad to workers who have been affected by changing technology. These institutions will help keep inequality in check and maintain social cohesion. The report also presents a third type of institution -- stewarding institution. These will design an approach to technological progress that delicately balances public welfare without stifling innovation. They will also promote the social acceptability of AI by ensuring transparency and accountability in AI systems. The report argues that labour and technology can complement each other to enhance productivity and don't always have to be substituted for one another. The report gave the example of automated manufacturing in the US textile industry, which ended up leading to robust job growth and higher earnings for workers over the next 40 years. It also suggested that AI agents that aid human decision-making and take over low-level tasks would be the optimal outcome for the economy. Further, humans have a much better grasp of the subjective and practical realities of the world, alongside critical thinking skills. "Replacing authentic, intelligent deliberation with a brutal, calculative algorithm will result in a society where algorithms serve as an escape from reason, an excuse not to think," argued the report. India is well positioned to benefit from the AI revolution, argued the Economic Survey. This is because of its young workforce, which is likely to adapt well to AI-driven changes. India must also prioritize capacity and institution building to fully leverage the opportunities ahead. This requires structural changes in education to better prepare future generations, along with safety nets to protect existing workers from economic and social disruptions. Additionally, regulatory frameworks must be revisited and updated to ensure AI adoption aligns with societal values. "The corporate sector has to display a high degree of social responsibility," said the report, urging companies to plan the introduction of AI over a longer period and with sensitivity, to reduce the burden on policymakers and the state's fiscal resources. It asked for a tripartite compact between the state, the private sector, and academia to ensure that gains from AI-driven productivity are inclusively distributed.

Economic Survey: Anxieties about AI impact on jobs remain high in India

The Survey highlights the growing concerns about the impact of AI on job markets.The rapid advancement of artificial intelligence (AI) technologies presents both "unprecedented opportunities and significant challenges" for labour markets worldwide, the Economic Survey 2024-25 noted, calling for "robust institutions" to be built to minimise the impact of AI on jobs in India. "In this context, as policymakers, it is important to pay attention to the evolving technological landscape and the potential impact it can have on the labour market," it said, adding that historical parallels with earlier technological revolutions underscore the critical role of institutions in managing disruption and ensuring equitable outcomes. The Survey throws light on the rising concerns of impact of AI on the job markets. A Bloomberg report, for example, said earlier this month that global banks are expected to slash as many as 200,000 jobs over the next three to five years as AI takes over tasks currently performed by humans. Further, San Francisco-based Salesforce, among the world's most-valued software companies, said earlier that it will not be hiring any more engineers this year amid significant productivity boosts from AI. "India's demographic advantage and diverse economic landscape position it uniquely to benefit from AI. However, achieving these benefits requires significant investments in education and workforce skilling, supported by enabling, insuring, and stewarding institutions. These mechanisms can help workers adapt to changing demands while providing essential safety nets," the Economic Survey noted. The Survey has also cited OpenAI founder and CEO Sam Altman's blog post from January 6, in which he said that, in 2025, we may see the first AI agents "join the workforce" and materially change the output of companies. "Anxieties about the effects of AI remain high in India as well, considering our country is a services-led economy. Among white-collar workers, an IIM Ahmedabad Survey highlights how 68% of the surveyed employees expect their jobs to be partially or fully automated by AI within the next five years. Forty per cent of the employees believe AI will make their skills redundant," the Economic Survey said. The Survey said that coordinated efforts will be required to address the structural issues that can intensify the impact of artificial intelligence on India's labour market. "...the establishment of new, and upgrading existing institutions will play a pivotal role. Social Infrastructure will provide the required foundation for ensuring that the gains from technology can translate into inclusive growth," it said. "The time afforded now must be well utilised to minimise the adverse effects to the best of our capabilities involving equipping the workforce with future-ready skills. We must also use this time to put in place mechanisms to cushion societal impacts, a challenge that resonates deeply with India's unique demographic and economic landscape," it added.Anxieties about AI impact on jobs remain high in India

AI takes the wheel in driving innovation across India's services sector, highlights Economic Survey

The Economic Survey 2024-25 highlights the rapid adoption of AI in India's services sector, making significant impacts in banking, finance, healthcare, telecom, retail, and transport. AI enhances customer experiences, operational efficiency, and fraud detection in banking; optimizes networks in telecom; improves personalized marketing in retail; and streamlines logistics through advanced route optimization and robotic systems.The Economic Survey 2024-25 highlighted the accelerating adoption of artificial intelligence in India's services sector, with major strides being made in banking, finance, healthcare, telecom, retail, and transport. The report, prepared by the Chief Economic Advisor to the Finance Ministry, stated that the services sector stands out for its swift embrace of AI, thanks to national initiatives and cutting-edge technologies that are reshaping operations across industries. AI is revolutionising the way financial institutions operate, enhancing customer experiences, and boosting operational efficiency. The State Bank of India (SBI) is using its chatbot, SBI Intelligent Assistant (SIA), to assist customers, while banks employ AI-powered fraud detection and risk management systems. Machine learning algorithms are even analysing customer data to flag suspicious transactions, streamlining the process of safeguarding finances. AI is transforming telecom by improving customer support, optimising networks, and predicting maintenance needs. The survey highlights AI-driven platforms that manage telecom networks end-to-end, leveraging machine learning to spot irregular network patterns and resolve issues before they impact operations. These AI systems enable telecom companies to enhance service quality and anticipate potential disruptions. Retailers are tapping into AI for personalised marketing, smart inventory management, and a better shopping experience. E-commerce giants, especially in fashion, are using AI to create more engaging, discovery-driven shopping journeys that keep customers coming back for more. In logistics, AI is streamlining operations, improving delivery accuracy, and boosting customer satisfaction. AI algorithms optimise routes to ensure on-time deliveries, while robotic systems in fulfillment centers handle sorting, packaging, and inventory management, reducing human intervention and increasing efficiency. India's demographic advantage and diverse economic landscape position it uniquely to benefit from AI, the Economic Survey asserted. However, achieving these benefits requires significant investments in education and workforce skilling, supported by enabling, insuring, and stewarding institutions, the state of the economy report tabled by Finance Minister Nirmala Sitharaman said. "These mechanisms can help workers adapt to changing demands while providing essential safety nets," the Economic Survey report read. The rapid advancement of artificial intelligence (AI) presents both unprecedented opportunities and significant challenges for labor markets worldwide. While impressive in its own right, AI still remains in its developmental stage and has a long way to go before it achieves the scope of adoption that have made technologies such as the personal computer and the internet ubiquitous. In this context, as policymakers, it is important to pay attention to the evolving technological landscape and the potential impact it can have on the labour market, the Economic Survey prepared under the leadership of Chief Economic Adviser Anantha Nageswaran said. "Historical parallels with earlier technological revolutions reveal the critical role of inclusive institutions in managing disruption and ensuring equitable outcomes." Barriers to large-scale AI adoption persist in the present, which include concerns over reliability, resource inefficiencies, and infrastructure deficits. Against that backdrop, the Economic Survey called policymakers to create a window for policymakers to act. Concerns and fears about Artificial Intelligence (AI) disrupting labour markets have intensified as developments in the field have continually demonstrated rapid progress over the last four years. The increasing complexity of the models being developed today represent a paradigm shift in the field of AI, showing the world that in a few years, 'intelligent machines' will be capable of performing tasks that are predominantly handled by humans today. The Economic Survey, quoting founder of the AI research and deployment company OpenAI, said how it had recently indicated they were expecting to have office ready 'AI workers' by the end of 2025.

Economic Survey Stresses Focus On Rapid AI Adoption In India's Services Space

The central government recognised that a strong social infrastructure will help graduate workforce towards medium and high skilled jobs, where AI can augment their efforts than the possibility of being replaced The Economic Survey 2024-25 tabled by the union finance minister Nirmala Sitharaman in the Parliament today (January 31), highlights rapid adoption of artificial intelligence (AI) in India's services sector, making impacts in sectors, including banking, finance, healthcare, telecom, retail and transport. The report further said that the services sector stands out for its swift embrace of AI, thanks to national initiatives and cutting-edge technologies that are reshaping operations across industries. AI enhances customer experiences, operational efficiency, and fraud detection in banking; optimizes networks in telecom; improves personalized marketing in retail; and streamlines logistics through advanced route optimization and robotic systems. In 2024, Prime Minister Narendra Modi said India should lead the AI revolution and called on the country's tech ecosystem to ensure this outcome. Currently, India is home to more than 200 GenAI startups, which raised over $1.2 Bn in funding between 2020 and the third quarter of 2024. The survey also said that the central government recognised that a strong social infrastructure will help graduate workforce towards medium and high skilled jobs, where AI can augment their efforts than the possibility of being replaced, which would essentially consume a long time to build such an infrastructure. It would also require an enormous amount of intellectual and financial resources to achieve the goal. This has been addressed at a time when the height of unemployment is yet to come down. As per Inc42's Indian startup layoff tracker, 2024 saw more than 9K startup employees losing their jobs against over 17K in 2023. Most of these brands that announced job cuts were largely attributed to the company's march towards profitability and cutting of redundant roles automated by AI. For instance, audio entertainment platform Pocket FM announced a restructuring exercise to cut jobs of about 75 employees to ensure its long-term sustainability in the market, earlier this month. Meanwhile, finfluencer Sharan Hegde's financial edtech platform, The 1% Club laid off 15% of its total workforce on account of AI-led automation, in November 2024.