Economic Survey 2023-24: How AI Can Impact Employment?

As per the Economic Survey 2023-24 of India tabled by Finance Minister Nirmala Sitharaman, the accelerated growth of AI is poised to revolutionize the global economy including India which tends to reshape the future of work. AI has considerable potential to boost productivity however may disrupt employment in certain sectors.

Routine tasks including customer service will likely witness a high degree of automation, creative sectors will see enhanced usage of AI tools for image and video creation, personalized AI tutors will reshape education, and sectors like healthcare may augment due to increased drug discoveries.

Research done in the US informs that Generative AI (GenAI) may have a greater impact on reshaping jobs than replacing jobs. According to the IMF, 40% of jobs are exposed to AI, and as per a study half of these jobs may be negatively impacted by AI. In India, 26% of the employment is highly exposed to AI, where 14% with high complementarity and 12% with low complementarity.

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According to a study, the demand for AI skills by businesses will negatively impact the need for non-AI roles and and top percentile of wages due to the displacement of high-skilled, managerial positions and non-routine, intellectual tasks.

Impact of AI on India’s employment

• In India, according to Capital Economics (2024), the current diffusion and adaptation of AI in India remains low compared to the US, Europe, and developed Asian economies.
• The manufacturing sector is less exposed to AI as industrial robots are not as cost-effective as human labor.
• In inventory and supply chain management, AI applications could complement labor.
• The BPO sector is at particular risk as GenAI is revolutionising the performance of routine tasks through chatbots and employment will decline in this sector in the coming 10 years.
• However AI can augment productivity in various fields such as identifying health risks through digital health data, predicting weather, and complementing teachers in grading tests and translating texts.
• In India a near exponential increase was observed for AI-related skills since 2016.
• In India, AI has made notable growth in the agri-tech, industry & automotive, healthcare, BFSI, and retail sectors.
• Government InitiativesIndian Government has launched several initiatives including
  • Future Skills Prime
  • YUVAi: Youth for Unnati and Vikas with AI
  • Responsible AI for Youth 2022
  • India AI Mission

Read also: Economic Survey 2023-24: Labour Force Participation, Skill Gap, Women And Youth Employment

Policy Suggestion for India

• Proactive government and industrial intervention can position India as a key player in AI.
• Employees or job seekers require skills beyond communication, collaboration, and presentation including analytical thinking and innovation, complex problem solving, technology design, and programming to face AI challenges.
• Not much research is conducted on AI and there is a need for research and development in this sector. The AI-related research published in 2019 in China was 102,161, in the US 74,384, and 23,398 in India.
• There is a need for an Inter-Agency Coordination Authority for AI to work as a central institution guiding research, policy planning, and decision-making.

A study conducted by Acemoglu and Johnson in 2023, suggests that automation may be good or bad depending on how we deploy it, and the direction of technology being implemented. Automation can benefit labor by significantly increasing the marginal productivity of labor and by increasing labor demand in non-automated tasks producing complementary products.