India’s Strategic Advantages
India’s robust digital ecosystem, underpinned by platforms like Aadhaar, UPI, and India Stack, provides a solid foundation for scaled AI applications. The country is also the second-largest generator of digital data globally, a critical resource for training AI models. With its large population and growing economy, India offers an ideal testing ground for AI-driven innovations.
Neha Sharma, Partner, People Advisory Services, EY India, said, “Over the last 12 to 15 months, there’s been so much discussion around jobs and [AI’s] impact on jobs — Elon Musk [saying] all human jobs are going to taken away by AI, even Bill Gates saying that we will probably move towards a three-day working week … from an EY standpoint, we sort of wanted to get a little deeper into this and really understand what the impact on jobs really means, and how should organisations or individuals prepare for this.”
She said AY we analysed over 10,000 tasks that cut across different sectors and industries and contribute to the running of the Indian economy. “We looked at these tasks from three different lenses — exposure, complementarity, and intensity. What our study reveals is that 42% of these tasks can be augmented, But 24% can be completely automated, which means in the next three to five years, they should be out of our workflow,” Sharma added.
The report highlights India’s vast STEM talent pool and its vibrant start-up ecosystem as key enablers of AI adoption and innovation. These factors, combined with the nation’s economic ambitions, create a fertile environment for AI to thrive.
Economic Impact of Gen AI
Generative AI is expected to add $359-438 billion to India’s GDP in 2029-30 alone, contributing an additional 0.9-1.1% to annual growth. Over the next seven years, Gen AI could contribute between $1.2 trillion and $1.5 trillion to the economy, making it a key driver of India’s future economic trajectory.
Rajnish Gupta, Partner, Tax & Economic Policy Group, EY India, said, “One of the things that we have done in the report is to actually try and put a number on to what will be the economy-wide improvement in the efficiency … we looked at the KLEMS database which is published by the RBI … when you look at the output of a sector, there are five things which go into it — labour, capital, energy, material, and other services.”
Six key sectors are expected to account for nearly 70% of Gen AI’s economic impact:
Business Services: IT, consulting, outsourcing, and legal services will see significant productivity gains.
Financial Services: AI will improve risk assessment, fraud detection, and customer personalisation.
Healthcare: Diagnostics, clinical documentation, and personalised treatment plans will be transformed.
Retail: Hyper-personalised marketing, inventory management, and customer engagement will be enhanced.
Education: AI tutors will deliver tailored learning experiences and generate curriculum content.
Transportation and Logistics: Intelligent fleet management and route optimisation will boost efficiency.
Challenges to Overcome
Despite its potential, India faces several challenges in fully harnessing Gen AI’s capabilities:
1. Talent Shortages: There is a gap in AI-specific skills, particularly in areas like prompt engineering and model fine-tuning.
2. Data Access: The availability of structured datasets, especially in local languages, remains limited.
3. High Infrastructure Costs: Compute resources such as GPUs and specialised chips are expensive, creating barriers for smaller players..
4. Regulatory Uncertainty: Clear policies on data privacy, intellectual property, and AI governance are needed to foster innovation.
Policy Recommendations
To address these challenges, the report proposes a comprehensive policy agenda for India:
Access to Data: Develop indigenous datasets for Indian languages and create public data marketplaces.
Public Goods: Build Indian large language models (LLMs) similar to UAE’s Falcon and deploy Gen AI tools in public services.
Infrastructure Development: Invest in domestic manufacturing of AI chips and subsidise compute resources for startups.
Talent Development: Establish Gen AI Centers of Excellence and attract global AI talent.
Regulatory Framework: Introduce AI experimentation sandboxes, watermarking for AI-generated content, and clear liability frameworks.
India’s Global Role in AI
A proactive approach to Gen AI could position India as a global leader in AI innovation. The report draws parallels with initiatives like Aadhaar and UPI, suggesting that similar efforts in AI could yield transformative results. For example, developing Indian LLMs and digitising local languages could make AI tools more accessible and inclusive.
Globally, countries and economic regions like the US, EU, and China are already advancing their AI agendas. India’s focus on creating AI as a public good, coupled with its entrepreneurial ecosystem, could give it a competitive edge in the global AI landscape.
The Road Ahead
As India prepares for the next wave of digital transformation, the adoption of Gen AI presents a once-in-a-generation opportunity to redefine industries, enhance productivity, and accelerate economic growth. However, success will require collaboration between the government, private sector, and academia to overcome challenges and unlock AI’s full potential.
With the right policies and investments, India has the potential to not only harness Gen AI for domestic growth but also emerge as a global hub for AI innovation, setting a benchmark for the world in leveraging transformative technologies, the report added.
