India's Potential As A Backend Hub For Generative AI Work
The impact of Generative AI, including models like ChatGPT, Bard, DALL-E, or Midjourney, on job creation and destruction is a topic of significant discussion in management consulting circles and corporate boardrooms. This debate has also caught the attention of macroeconomists. In the past, technological revolutions were assumed to primarily affect low-skilled jobs, leaving creative work requiring human thinking and creativity largely untouched. However, Generative AI models have demonstrated their capabilities across various domains, from content creation to image generation, music and video production, and even medical diagnosis.
Optimists in this conversation put forth two key arguments. First, they argue that while Generative AI can perform creative tasks, it will still require human guidance, training, and “prompting” to unleash its full potential. This, in turn, will create a multitude of new jobs to refining AI algorithms and models. Second, these optimists believe that while Generative AI is impressive, it makes mistakes and will not replace humans anytime soon. Humans will be needed to monitor, edit, and correct the content generated by AI.
Indian optimists add another layer to the discussion, contending that India, with its demographic profile and a large pool of technologically trained youth, can become the backend hub for much of the generative AI-based work. However, these arguments face a reality check based on historical evidence. Technological advancements have consistently led to a lower number of jobs created compared to those made redundant. There is no solid evidence that Generative AI will deviate from this trend. Additionally, while productivity improvements are expected, India”s employment elasticity to GDP growth has been declining over the years, meaning that job creation has not kept pace with economic growth.
The argument that Generative AI is still too error-prone to swiftly replace human workers is also questioned. The AI models, such as ChatGPT 3.5 and ChatGPT 4, have evolved significantly and can generate superior text in emails, letters, reports, and articles compared to many human workers. While highly skilled humans remain superior, AI can outperform mediocre office content creators.
The issue of India”s demographic dividend is another point of contention. India faces a gap between the skills available and those required for high-knowledge and skilled jobs. The country”s education and skill development systems have not kept pace with the demands of the job market. Many graduates require extensive post-recruitment training to fulfill their roles effectively. Additionally, India”s labour force participation rate (LFPR) is below 50 percent, indicating that only a fraction of the working-age population is actively seeking employment.
While Generative AI may create new jobs, the scale of job creation remains uncertain. Policy interventions are necessary to ensure that India”s workforce is adequately skilled and educated to capitalise on these potential employment opportunities.
