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Published 08:47 IST, February 1st 2025

Budget 2025: Is India Ready For AI Boom? Economic Survey Decodes

Collaborative effort between government, private sector, and academia essential to minimise adverse societal effects of AI-driven transformation.

Reported by: Musharrat Shahin
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Budget 2025: Is India Ready For AI Boom? Economic Survey Decodes
Budget 2025: Is India Ready For AI Boom? Economic Survey Decodes | Image: R Business

According to the Economic survey presented ahead of union budget 2025, the rise of Artificial Intelligence (AI) is expected to bring economic and social changes, making it necessary for the government to provide safety nets for workers. Both the government and private sector must work together to introduce AI gradually to minimize job losses.

As per the report, AI is anticipated to surpass human performance in critical decision-making across various fields, including healthcare, research, criminal justice, education, business, and financial services. 


The survey stated If companies fail to manage AI’s impact on jobs, the government may consider taxing AI-driven profits. However, excessive intervention could harm economic growth. Policymakers need to closely monitor AI adoption to ensure its benefits outweigh its risks.
 


Collaboration for AI Readiness


The survey highlights the need for collaboration between policymakers, private companies, and academia to ensure AI-driven innovation aligns with social goals. This approach will help maximize AI’s benefits while minimizing disruptions.

“By fostering collaboration between policymakers, the private sector, and academia, India can align AI-driven innovation with societal goals. Ensuring inclusivity and sustainability in this transition is key to maximising benefits while minimising disruptions,” the Survey stated.


Challenges in AI Implementation

India's AI development has progressed gradually over the past 70 years, with early research at institutions like IIT Kanpur and the Indian Institute of Science beginning in the 1970s and concentrating on introducing AI courses and laying the groundwork for future research in the field. However, government initiatives and rising private sector investment have largely been responsible for the country's recent significant growth and wider adoption of AI.

"To minimise the risks associated with AI, and the potential job losses due to the technology, India should also focus on high-quality institutions that can act as mediators while also helping to equip the workforce with the skills to adapt to the changing landscape" the Survey noted.

Despite rapid AI advancements, issues like reliability, resource inefficiencies, and infrastructure gaps present challenges. These hurdles offer India time to build institutions that can guide AI adoption responsibly.


Ensuring Ethical AI Adoption


Managing institutions must work across industries, beyond just the services sector, to promote transparency and accountability in AI. This is particularly important in human-centric sectors like healthcare, insurance, and education where AI biases could have serious consequences.

"These stewarding institutions, however, will need to cut across industries and sectors instead of focusing their energies on India’s services sector, which, despite being one of the biggest employers in India, uses a lot of low-skill, low-value-add workers" the Survey noted.

The survey clarifies that AI regulation should not restrict innovation but ensure that policymakers are well-informed to mitigate risks when needed. Responsible oversight will allow AI to grow in a way that benefits society while minimizing unintended consequences.


AI as a General-Purpose Technology


Large-language models and AI-driven applications, such as self-driving cars, must prove their real-world effectiveness, affordability, and social acceptance before achieving widespread use. Policymakers must assess AI’s practical impact rather than just its technological capabilities.

“Despite the fast-paced developments in the field of AI, India has the time to build supporting institutions needed to ably help its workforce as technological revolutions have to overcome several obstacles such as changing the fundamental nature of the way technology is demanded by users, reorienting macroeconomic processes by changing investment habits, and the education and quantity of labour”  the Survey said.


 AI Era: Gender Inclusion


The digital economy provides an opportunity to bridge the gender gap by enabling remote work, which helps women overcome barriers like limited education, job opportunities, mobility constraints, and cultural biases. The survey highlights how digitalization can enhance financial independence and empowerment for women.

“Such barriers frequently exclude women from participating in traditional labour markets, particularly in developing economies. The key benefit of the digital economy is that it allows and encourages remote working, where gender may not matter as much as in the physical economy,” the Survey noted.

“These opportunities, in turn, allow women in developing countries to have increased financial independence and empowerment. To ensure the long-term benefits of digitalisation on employment, the government must work on the right policies to address potential negative impacts on labour share due to automation and digital integration” the Survey said further.

AI Era: Digital Economy


While digitalization opens new job opportunities, it also poses risks of reducing the labour share due to automation. To sustain employment growth, the government must implement policies that balance technological advancement with job security.

“For instance, the pursuit of smarter AI models promises to propel the applicability of self-driving cars but identifying why they are needed, their cost-effectiveness, and social acceptability remains an ongoing challenge,” the Survey said.

India’s AI and digital transformation present both opportunities and challenges. By investing in education, regulation, and workforce upskilling, the country can harness AI’s potential while ensuring economic stability and inclusivity.
 

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Updated 08:47 IST, February 1st 2025