Small increase in AI intensity by Indian firms can result in a 2.5% increase in India’s GDP in the immediate term: Nasscom
The National Association of Software and Services Companies (NASSCOM) along with ICRIER, one of India’s leading think tanks and Google launched their research findings from the study titled “Implications of AI on the Indian Economy.”
India’s Artificial Intelligence (AI) moment is truly here and now. The transformational potential of AI stems from its application to a diverse range of applications across sectors and its ability to address developmental challenges in agriculture, healthcare, education and access to financial services. Its pervasiveness is akin to electricity, computers and other examples of General-Purpose Technologies (GPTs), the emergence and diffusion of which have enabled the wealth of nations.
The report estimates that a unit increase in AI intensity by Indian firms can result in a 2.5% increase in India’s GDP in the immediate term. AI intensity is measured as the ratio of AI to total sales of the firm. In the absence of a direct measure of AI at the firm level, the model uses investments in software, databases and computer machinery as a proxy for AI. The results of the model find a positive and significant relation between AI using firms and growth in total factor productivity (TFP).
However, the current rate of growth in AI investments is unlikely to increase the levels of AI intensity adequately. In order to trigger a positive growth shock, AI intensities should be sharply increased. For example, the investment of Rs. 7000 crores approved by the Ministry of Finance towards an Artificial Intelligence program could increase AI investments at rates higher than the business as usual rates. This increase in investment will lead to approximately 1.3 times increase in AI intensity, translating into spillover benefits of 3.2% increase in India’s GDP.
The report’s econometric estimation provides adequate evidence for policy measures required to support AI’s wider adoption in India, including (1) identifying a nodal agency for the development and diffusion of AI, (2) building collaborative frameworks for engagement between governments, Industry and academia; (3) building an all-encompassing data strategy for India; (4) addressing India’s skill gap in AI and (5) promoting the development of AI safety standards.
In his special address, Amitabh Kant, CEO, NITI Aayog said “India is in the midst of a once-in-a-generation disruption driven by Artificial Intelligence. Artificial Intelligence has become a strategic lever for economic growth across nations and will continue to be one of the most crucial technologies of the future. By integrating new technologies like AI and ML into various sectors, we can radically leapfrog and catch up with advanced economies.”
In his presentation of the report findings, Rajat Kathuria, Director and CE, ICRIER said, “The government has an active role to play in creating institutions and providing public goods that enable India’s AI ecosystem, while also encouraging private actors to innovate and thrive.” “The vast impacts of AI and the current circumstances combine to merit mission mode action of AI programs across sectors, by government at all levels. This will help overcome the inherent market failure evident in early phases of any technology”, he added.
During the discussion, Debjani Ghosh, President, NASSCOM said, “In hopes to accelerate growth and pave a path towards innovation, Artificial Intelligence has a definite role to play in empowering industries, infrastructure and the society at large. With sheer enthusiasm we are now fostering investments in the new generation of digital natives to elevate industry growth trajectory and further boost productivity levels.”
Sharing his thoughts on Google’s vision for India, Sanjay Gupta, Country Head & VP, Google India, said “This is a seminal report, estimating a 2.5% growth in India’s GDP if India adopts AI in a sustained way. There is no doubt in my mind that with close collaboration between the private and public sector, and by focussing our collective expertise and energies on the most pressing problems of today, we will go a long way towards achieving the vision of a socially empowered, inclusive, and digitally transformed India.”
Manish Gupta, Director, Google Research said, “We at Google are now working on future products that will be highly impactful with the help of AI. The healthcare sector is personally close to my heart — it is something India doesn’t have enough of, and there is room to get smarter in both wellness and preventive healthcare. Analysis of data from sensors in mobiles and wearable devices can help prevent diseases, while there are people who are not even aware that they have a disease. We are planning to apply AI in healthcare in a big way.”
