Generative AI is going to be transformative in the economy of India, adding between USD359 billion and $438 billion to the country's gross domestic product by FY 2030, an estimate shared by RBI deputy governor Michael Patra during a recent discussion on the intersection of technology and economic development.
Patra brought out the potential of generative AI to support innovative activities, increase productivity, and bring about significant alterations to different sectors. As the growth of India's more digitally oriented economy is gaining rapid acceleration, the influence of AI shall mark the foundation of economic impact growth.
Generative AI could be a growth driver. In his projection, Patra reckoned 1.5 percent of Indian GDP by 2030 would be fueled by AI capabilities that come up with something new like text, visuals, and codes. "The growth of GDP will possibly come from efficiencies and cost reductions that have translated into innovative breakthroughs around the industries," he noted.
"Generative AI represents a new frontier in the digital age, with the power to reshape traditional industries and create entirely new ones," said Patra. He added: "The ability to unlock unmatched productivity and service delivery is going to give new heights to sectors such as healthcare, education, finance, and manufacturing."
When generative AI ripple hits these critical sectors, industry impacts are likely to hit across a range of related fields:
Healthcare: AI-based solutions have made it possible to get better diagnostics, personalised medicine, and innovative drug discovery. Generative models are used to analyze large amounts of medical data to detect patterns and predict health outcomes.
Banking and finance: Financial institutions use AI to automate fraud detection, improve customer experiences, and optimise the processes of risk management.
Education and workforce: AI tools can personalise learning, close skill gaps, and make it easier to access education which can prepare the workforce in the future.
Manufacturing and Supply Chain: With the help of generative AI, production workflows get optimized, supply chains streamlined and inventory management improved, thus helping realize the objectives of initiatives like Make in India.
Patra emphasised the KLEMS framework in studying the digitalisation productivity effect, dividing contributions from ICT capital and human capital along with complementary investments into components. Therefore, the KLEMS method offers a well-structured approach to how generative AI and the like influence economic growth. KLEMS stands for capital (K), labour (L), energy (E), materials (M) and service (S)
However, Patra pointed out that the the lack of granular data in fully capturing the impact of AI is challenging. Enhanced data collection mechanisms along with robust analytical tools are going to be essential to extract maximum benefits from generative AI.
Despite its vast potential, generating AI has challenges. First, there are data privacy concerns, ethical use of AI, and job displacements due to automation, among others. Patra underscored this by saying that the regulatory framework should be able to encourage accountability on one hand and innovation on the other.
Bridging the digital divide is another very critical issue. The issue of easy access to AI-driven technology in rural and under-developed areas becomes an extremely important agenda item for comprehensive economic growth. This seems likely to be achievable through combined government and private-sector initiatives in building on the government's "Digital India" venture.
India is a world leader in generative AI innovation, having a strong IT industry and a developing startup ecosystem coupled with low-cost solutions. Patra seemed confident that India could come out as a leading country for AI-driven solutions, catering not only to local needs but also to global demands.
India's opportunity to make its space in the international AI race, led by the US and China, is to develop scalable yet efficient AI applications.
The integration of generative AI into the Indian economy represents a transformative opportunity. Strategic investments, robust policy frameworks, and a focus on inclusivity place India in an ideal position to leverage the potential of AI for long-term growth.
Patra said such effective use of AI technologies would not only contribute positively to GDP but also help mitigate some of the nation's most urgent challenges regarding health, education, and sustainability and pave the way toward a more innovative, equitable future.