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The rise of artificial intelligence is set to reshape labour markets across the globe, but for India, the stakes are even higher. The Economic Survey 2024-25, tabled by Finance Minister Nirmala Sitharaman, raises concerns over the country’s ability to balance AI-driven productivity with the potential loss of jobs, especially in a labour-intensive economy. If businesses rush to automate without considering long-term implications, the report warns, India could face mounting demands for policy intervention and government support.
The survey states, “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.”
The report underscores a key dilemma—if AI displaces large numbers of workers too quickly, the state may be forced to intervene through taxation on AI-driven profits to compensate for lost incomes. Quoting the International Monetary Fund (IMF), the survey warns that such taxation measures could ultimately drag down economic growth, leaving “everyone worse off.”
A critical window to act
The survey highlights the importance of using AI’s early developmental phase to create policies that mitigate job losses. It suggests a coordinated effort between the government, private sector, and academia to ensure that AI’s benefits are broadly distributed.
It states, “A tripartite compact between the government, private sector and academia can ensure that the gains from AI-driven productivity are widely distributed, taking us in the direction of the ideal inclusive growth strategy.”
While AI has made remarkable progress over the past decade, it still lags behind the mass adoption levels of the personal computer and the internet. The survey stresses that despite fears of widespread job displacement, AI remains in its early stages, and its real impact on employment may not be as catastrophic as some projections suggest.
However, it warns against complacency, noting that “complacency about the ‘low probability-high impact’ nature of the issue at hand could prove to be very costly for a country like India.”
A question for policymakers: Is AI a solution in search of a problem?
The survey prompts policymakers to consider AI’s real-world necessity. It poses a fundamental question: “What were the problems in the world that demanded AI as the answer?” This reflects concerns that AI might be advancing for the sake of innovation rather than addressing an urgent need.