Artificial intelligence (AI) could lift India’s annual GDP growth by 0.4–0.9 percentage point, but the gains will depend on how effectively businesses adopt the technology and whether workers can move into higher-value roles, according to a Bloomberg Economics report published in October.
The report, Silicon, Steel, and Statecraft: New Economic Thinking for the New Economy Forum, says India’s information technology (IT) services industry could benefit if companies use AI to develop new products and services rather than rely on routine software development, customer support and back-office work. However, AI could also automate existing jobs without creating enough new opportunities, increasing unemployment and inequality.
The potential growth dividend is not guaranteed. Limited AI infrastructure, the cost of deploying the technology and the difficulty of integrating it into existing business operations could restrict the boost to India’s economy to 0.1–0.3 percentage point annually, the report says.
IT professionals could benefit if the industry moves up the value chain
India’s $300 billion IT services industry has traditionally relied on a large pool of skilled, English-speaking and cost-competitive workers to provide software development, customer support and back-office services to global clients. could disrupt this model by automating routine cognitive tasks and reducing demand for some existing services.
Companies could also shift certain activities closer to their overseas markets, weakening demand for Indian IT services. If this happens, both output and employment could come under pressure.
But the technology also offers an opportunity for the sector to move into higher-value work. Indian IT companies could develop AI-enabled products and services, helping them capture new sources of demand rather than compete primarily on the cost of delivering existing services.
The report points to Infosys and Tata Consultancy Services as companies making this shift. India’s large pool of engineers could remain a competitive advantage if firms can use their skills to build and deploy AI-based solutions.
Which jobs are exposed to AI, and what does that mean?
The report estimates that 6% of Indian jobs are meaningfully exposed to the first-order effects of generative AI, meaning workers could perform tasks more efficiently with access to chatbots. The share rises to 12% if workers have full access to AI-powered software tools.
The report’s occupational analysis identifies IT professionals, business professionals, teachers, health professionals, and chief executives and legislators among the occupations exposed to generative AI. General clerks and sales workers also feature in its analysis.
However, exposure does not automatically mean that a job will disappear or that workers in that occupation will benefit. AI could help complete tasks more efficiently, but the eventual effect on employment will depend on how employers use the technology and whether productivity gains translate into new work.
Infrastructure and adoption will determine the size of the gains
The report estimates that AI could increase labour productivity by about 30% on average, based on empirical studies. Applying this to India’s -weighted exposure, and accounting for labour’s 60% share of income, suggests a potential 4–9% increase in total factor productivity after full adoption.
Assuming the technology spreads through the economy over a decade, this translates into an additional 0.4–0.9 percentage point in annual productivity growth. The estimate assumes AI reaches its full potential and does not cause lasting job losses.
India’s readiness to capture these gains remains a constraint. Its score on the International Monetary Fund’s AI preparedness index is around 60% of the US level, which the report uses to scale down the potential growth boost to 0.1–0.3 percentage point annually.
For India, the central question is whether AI creates enough higher-value work and makes workers more productive to offset the jobs and services that automation could displace. The report warns that if automation dominates without generating new opportunities, the technology could increase unemployment and inequality rather than accelerate development.