AI and job loss: Economic Survey calls for building institutions to minimise impact
The Economic Survey 2024-25 noted that a labour-intensive economy like India cannot afford large job displacement due to AI.
The Economic Survey for 2024-25 called for a sensitive approach to building institutions to deal with the potential impact of artificial intelligence (AI) on jobs in India's labour-intensive economy.
Devoting a separate chapter on the advancements in AI and its impact on the labour market, the Survey pointed out, “Societal impacts of these revolutions also extends to economic disparity. Workers may not immediately benefit from the productivity and profitability gains associated with technological advancements.”
It further noted, “Protracted labour displacement is something that a labour-surplus country like India cannot afford.”
According to the International Labour Organisation's generative AI assessment report released in 2023, nearly 75 million jobs globally are at complete risk of automation due to AI.
The Economic Survey highlighted that the primary challenge is job creation as India would have to create an average of 78.5 lakh jobs annually in the non-farm sector by 2030 to cater to the rising workforce, as highlighted in the 2023-24 Survey as well.
The Survey assessed that any large-scale job displacement would result in a fall in consumption, which would have cascading macroeconomic implications and potentially set the country’s economic growth trajectory off course.
“For India to seriously consider the effects of AI, actions will have to focus on strong institution building,” it noted.
Given that the majority of India’s workforce is employed in low-skill and low-value-added services vulnerable to AI, robust enabling institutions are essential in transitioning workers to medium- and high-skilled jobs where AI can augment their efforts rather than replace them, the Survey pointed out.
India needs to utilise the window of opportunity while AI remains in the nascent stages to build robust institutions. "This can then help tilt the scale towards the benefits, bringing a balance to the ‘cost-benefit’ aspect in a labour-driven, services-dependent economy like India," it said.
The Survey also noted that it will take some time for AI to be widely adopted as this would require a holistic infrastructure that combines technological resources, human expertise, and organisational readiness.
“Technology does not always have to displace labour but instead can be put to use in augmenting the productivity of the workforce,” the Survey said.
Research has already demonstrated that generative AI assistants augment customer support personnel and increase productivity by 14% on average, including a 34% improvement for new and lower-skilled workers, it added.
The Survey also cautioned against any complacency about the ‘low probability-high impact’ nature of the issue at hand and it could prove to be very costly for a country like India.
It called for a close coordination between government, private sector, and academia to ensure that the gains from AI-driven productivity are widely distributed to create an inclusive growth strategy.
Edited by Kanishk Singh