Economic Survey warns AI poses significant uncertainty for workforce

The Economic Survey 2023-24 has highlighted the substantial uncertainty AI brings to workers across all skill levels, cautioning that this will create challenges for India's sustained high growth rates in the coming years and decades.

In the preface, Chief Economic Advisor V. Anantha Nageswaran said that "deploying capital-intensive and energy-intensive AI is probably one of the last things a growing, lower-middle-income economy needs." He added that the corporate sector must consider how AI can augment rather than displace labour.

The Survey acknowledged that the social impact of AI, particularly regarding labour market disruptions and displacement, is not well understood. It also noted a significant slowdown in IT sector hiring over the past two years.

"The advent of AI casts a huge pall of uncertainty as to its impact on workers across all skill levels—low, semi, and high," the Survey said, adding that these disruptions will create barriers to sustained high growth for India.

Recognising AI as a general-purpose technology akin to electricity and the internet, the Survey warned that AI's rapid pace of innovation and adoption could reshape the future of work. While AI holds potential for productivity boosts, it also threatens employment in certain sectors.

Routine tasks, creative sectors, education, and healthcare are among the areas expected to see significant disruption. AI could automate routine tasks, enhance creative work, provide personalized education, and accelerate drug discovery in healthcare.

India, with its vast demographic dividend and young population, faces both risks and opportunities with AI. The BPO sector is particularly vulnerable, with significant employment declines anticipated due to AI advancements like chatbots.

Despite these risks, the Survey noted that gradual AI diffusion could enhance productivity in the long term. However, AI adoption across the services sector may reshape or replace many jobs.

The Survey indicated that the demand for AI skills negatively impacts non-AI roles and high-skilled, managerial positions due to the displacement of intellectual tasks.

India's affinity for technology, demonstrated by its digital public infrastructure, positions it well for proactive government and industry interventions to leverage AI.

To address the AI challenge, workers need advanced skills such as analytical thinking, innovation, complex problem-solving, critical thinking, technology design, programming, and adaptability.

The Survey pointed out a lack of prior research on AI's impact in India, emphasizing the need for further research and development. It noted significant AI growth in sectors like agri-tech, industry, automotive, healthcare, BFSI, and retail.

(With PTI inputs)