AI Update: AI will transform India's economy, boosting its economy, World Bank claims..
India is poised to reap significant economic benefits from Artificial Intelligence (AI), and this could revive private investment. This claim has been made by Franziska Ohnsorge, Chief Economist for South Asia at the World Bank.
Ohnsorge stated in a media interaction on October 4th, "India is well-positioned to take advantage of AI. It is being adopted very rapidly. People are using it in various ways, and investment will increase with it. However, it is difficult to say whether this will be significant enough to alter macroeconomic statistics."
AI Readiness and Rapid Adoption
Ohnsorge stated that India's AI Readiness Index is very high compared to other emerging economies, almost at par with developed countries. She added that AI use is being seen most significantly in the BPO sector, where job postings requiring AI skills have doubled since the launch of ChatGPT. They now account for approximately 12% of total jobs, three times more than in other sectors. This impact is visible in service exports. Computer services exports have increased by 30% since the launch of ChatGPT, while overall services export growth has remained stable.
Private Investment: Slow, but Still Strong
Private investment growth in India has slowed slightly since the pandemic, while it has increased in many other emerging countries. However, government investment has grown rapidly. According to Ohnsorge, despite the slowdown, private investment growth in India has been higher than in most developing economies. He also noted that FDI remains slightly weak compared to international standards. Beyond services, Ohnsorge said that tariffs and new trade agreements could boost manufacturing in India.
How India will benefit
Ohnsorge said that the economies of Mexico and Vietnam have access to approximately 50% of GDP with their trading partners. For India, this currently amounts to 12% of GDP. If India strikes deals with the UK, the European Union (EU), Australia, Canada, and possibly the US, this reach could even increase to 50% of GDP. He described the UK trade agreement as the most ambitious in the last decade, as it covers not just tariffs but also services and labor mobility. The World Bank will release its South Asia report on October 7. Earlier, in its June report, India's GDP growth rate was estimated at 6.5% for FY26 and 6.7% for the next fiscal year.
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