Artificial intelligence (AI) should be able to help rather than replace jobs, the Economic Survey 2024-25 said on Friday. It said that some of the fears about AI being hugely disruptive to employment might be “misplaced”.

It said that for India, a services-driven economy with a youthful and adaptable workforce, the adoption of AI offers the potential to support economic growth and improve labour market outcomes.

“Technological developments over recent years have generated much discussion on the impact of AI on India’s labour market. The integration of AI into India’s labour market presents an opportunity to enhance productivity, elevate workforce quality and create employment, provided, systemic challenges are effectively addressed through robust institutional frameworks,” it said.

It said that India’s employment challenge is not just about numbers but also about raising the overall ‘quality’ of the workforce and quality in this case does not just mean imparting knowledge through a step-by-step guide to leveraging AI, or providing very specific training related to ‘AI oriented jobs.’

“Technology-specific skills run the risk of becoming obsolete very soon, especially in today’s world where the requirements shift rapidly,” it noted.

It also mentioned that prioritising education and skill development will be crucial to equipping workers with the competencies needed to thrive in an AI-augmented landscape. By capitalising on the global infancy of AI, India has the opportunity to prepare its labour force for a future defined by collaboration between human and machine intelligence.

“We must also use this time to put in place mechanisms to cushion societal impacts, a challenge that resonates deeply with India’s unique demographic and economic landscape,” it said.

Social responsibility

The Survey also said that corporate sector has to display a high degree of social responsibility and although the impact of AI on labour will be felt across the world, the problem is magnified for India, given its size and its relatively low per capita income.

“If companies do not optimise the introduction of AI over a longer horizon and do not handle it with sensitivity, the demand for policy intervention and the demand on fiscal resources to compensate will be irresistible,” it said.

The State, in turn, has to resort to taxation of profits generated from the replacement of labour with technology to mobilise those resources, as the IMF suggested. It will leave everyone worse off and the country’s growth potential will suffer, as a result, the Survey said.

It added that the services sector, including banking, financial services, and insurance (BFSI), healthcare, telecom, retail, and transport and logistics, stands out for its rapid AI adoption, supported by various national initiatives and technologies.

AI governance framework

Meanwhile, the Survey also highlighted that establishing robust AI governance is the first and crucial step in addressing the challenges that come with the implementation of AI systems.

Without an appropriate governance framework, AI systems may operate without clear guidelines or oversight, leading to potential abuse or misuse of technology, it said.

“As vulnerabilities could evolve with the pace of innovation and degree of AI integration in financial services, regulatory and supervisory effectiveness may take a backseat if financial regulators’ AI-related skills and knowledge do not keep pace with developments in this space,” it said.

Accordingly, the RBI has proactively engaged with regulated entities and experts to assess the ongoing developments while effectively communicating its expectations through multiple engagement fora. It has also created a regulatory sandbox focusing on innovative technology products/services and announced the establishment of a committee to create a Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) in the financial sector.

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