Government has done its part on GCC, industry must build capabilities to meet AI challenge: CEA

Chief Economic Adviser V Anantha Nageswaran on Thursday said the government has done its part by announcing several measures in Budget to support Global Capability Centres (GCCs), and called on industry to invest in skilling, capability development and innovation to address the challenges posed by artificial intelligence.

Observing that AI has exposed old model, Nageswaran said it is likely to displace routine, repetitive and rule-based tasks, and it would be unrealistic to deny the risks posed to business models built solely around low-cost execution.

Highlighting the role of government-industry collaboration, the CEA said the Union Budget has addressed a long-pending industry demand by simplifying and expanding the transfer pricing safe harbour regime for GCCs.

The revised framework provides a uniform margin, significantly higher thresholds and faster, more predictable approvals over a multi-year period, improving tax certainty for such centres, he said addressing CII GCC Summit here.

The government has also launched a national framework to encourage the expansion of GCCs beyond the six major metropolitan cities into tier-II and tier-III locations, he said.

"This is not only an economic goal; it is a matter of fairness. The opportunity should not sit in a few metros alone," Nageswaran said.

At the same time, he underlined that government policy alone cannot secure India's leadership in the sector.

"Government can build the runway, but it cannot fly the plane. The move from cost to capability, from execution to innovation, has to be made by firms and by people," he said.

The CEA identified skilling as one of India's biggest challenges, noting that while the country produces a large number of graduates every year, too few are industry-ready when they enter the workforce.

Besides, he asked industry to focus on building capabilities and innovation as the country's long-term advantage will depend on its ability to move from cost competitiveness to capability.

"Artificial intelligence does not build, deploy, or govern itself. Someone has to design these systems, train them, test them, correct them, and hold them to account. Someone has to decide where they should be used and where they must not be used," he said.

The responsibility associated with deploying AI systems is expanding rather than shrinking, and an increasing share of such work is being undertaken in India, he said.

"AI does not, therefore, empty these centres. In the centres that are run well, AI raises the value of each person who works there. The centres that stand still will suffer. The centres that move up will thrive," he added.

Sounding a note of caution, Nageswaran said success should not breed complacency.

While India's advantage has been built over time, it can also erode as competing countries strengthen their capabilities, costs rise and skilled talent becomes increasingly scarce, he said.