Economic Survey 2024-2025 highlights AI’s potential and challenges for India’s workforce

The Economic Survey 2024-2025, presented by Union Minister of Finance and Corporate Affairs, Nirmala Sitharaman, in Parliament today, sheds light on the dual-edged impact of Artificial Intelligence (AI) on India’s economy. While AI promises to revolutionize industries by automating vast amounts of work, it also raises concerns over potential mass labor displacement, particularly for workers in the middle- and lower-income brackets.

The report cites historical precedents from previous industrial revolutions, as pointed out by Andrew Haldane, former Chief Economist of the Bank of England. These revolutions, though leading to economic advancements, also brought widespread hardships, prolonged unemployment for displaced workers, and rising income inequality. The Economic Survey emphasizes that India, with its predominantly service-oriented economy and a large IT workforce engaged in low-value-added tasks, is highly vulnerable to automation. These workers are at risk of being replaced by technology as companies seek cost reductions.

Leveraging AI to minimize negative impacts

According to the Economic Survey, India must proactively address the challenges posed by AI, ensuring that its benefits are widely shared. To mitigate the negative impacts of automation, the report advocates for a collective societal effort involving the government, private sector and academia. The government is urged to fast-track the creation of strong institutions that can guide the workforce transition towards medium- and high-skill jobs, where AI can complement human capabilities rather than replace them.

The survey underscores the importance of building social infrastructure, which includes enabling institutions, insuring institutions, and stewarding institutions. These structures will help graduate the workforce into roles where AI enhances productivity, rather than making them obsolete. However, it warns that building such institutions is a time-consuming process, requiring massive intellectual and financial resources.

The report also highlights several challenges that AI developers must overcome before the technology can be widely adopted in India. Key concerns include the practicality and reliability of AI systems, the need for significant infrastructure to support AI scaling, and ensuring that AI models improve efficiency without sacrificing performance.

Interestingly, AI has the potential to complement labor and increase overall workforce productivity when implemented carefully. It notes that automation has historically led to a rise in the employment-to-population ratio, provided it is integrated thoughtfully and supported by institutional frameworks. In this context, the future of work in India lies in the concept of "Augmented Intelligence," where human and machine capabilities work together to boost job performance and societal benefits.

Furthermore, the Economic Survey suggests that India can build a workforce capable of utilizing AI to improve efficiency and create new economic opportunities. However, policymakers must strike a balance between encouraging innovation and managing the societal costs of AI-driven labor market shifts.

It urges both the corporate sector and the government to approach the introduction of AI with sensitivity to India’s specific needs, ensuring that the technology is adopted responsibly. While AI is still in its early stages, India has the time needed to address these challenges, strengthen its institutional foundations, and mobilize a nationwide response.