The Impact of Artificial Intelligence on Indian Economy: Prospects and Challenges

This study assesses the impact of artificial intelligence (AI) on Indian economy. To do so, we first analyse the linkage between AI, employment and economic growth. Second, this study elaborates on the role of AI in shaping India’s Human Development Index (HDI) and compares it with three major economies. Finally, to supplement the analysis, the article makes a quantitative assessment of the effect of AI on economic growth in India. The analysis does not reveal that the displacement effect of AI on employment outweighs the complementary effect in the Indian context so far. However, from the demand side perspective, there might be a reduction in demand for non-AI-related jobs and an increase in AI-related jobs. Further, results show that an increase in AI vibrancy index support better performance of HDI in India in comparison to the China, Germany and the US. Finally, by employing an ARDL model, the results reveal that AI only positively affect the economic growth in the long-run but not in the short run. From a policy perspective, while the Government of India has taken proactive steps for AI-enabled schemes, greater emphasis on appropriate strategies is required to generate more employment through the adoption of AI.