Goldman Sachs sees Gen-AI boosting India's growth, but warns of uneven impact on jobs

Generative artificial intelligence (Gen-AI) is expected to be a medium-term positive for India's economic growth, although its impact on the labour market will be uneven, with some occupations facing displacement while others stand to benefit from productivity gains, according to a Goldman Sachs Research report.

The report estimates that Gen-AI could perform 9-17% of tasks currently undertaken by India's non-agricultural workforce, depending on the complexity of tasks the technology is ultimately able to handle.

Goldman Sachs said Gen-AI is more likely to complement workers than replace them. It estimates that 42-48% of non-agricultural employment is likely to benefit from AI-assisted productivity, while 8-12% of jobs face substitution risk. The remaining workforce is expected to remain largely unaffected.

Clerical jobs face highest risk

The report said employment declines are likely to be concentrated in routine clerical, professional and technician roles, where repetitive and codifiable tasks are more susceptible to automation.

In contrast, routine physical occupations, craft and trade workers, and machine operators could see stronger demand as manual, physical and interpersonal work remains difficult for AI to automate.

Services sector most exposed

Goldman Sachs found that AI exposure is concentrated in the services sector. Healthcare, education, financial services, and professional services are expected to benefit from AI-assisted diagnostics, analytics and knowledge-based work. However, IT-enabled business process services (BPS), postal services and telecom face higher substitution risks because of their reliance on repetitive processes.

Manufacturing, construction and mining are expected to experience a comparatively limited impact due to the physical nature of work.

The report also noted that, as with previous technological revolutions, Gen-AI is likely to create entirely new categories of jobs over time, although these were not included in its analysis.

Productivity gains over the next decade

Goldman Sachs estimates that widespread Gen-AI adoption could increase India's annual labour productivity growth by around 0.4 percentage points over the next 10 years, with gains ranging between 0.1 and 0.8 percentage points depending on advances in AI capabilities.

Knowledge-intensive sectors such as healthcare, education, media, financial services and professional services are expected to benefit the most, while productivity gains in construction and manufacturing are likely to remain modest.

The report said the sequencing of AI deployment will be critical. Prioritising AI as a tool to augment workers before replacing them could allow productivity gains to spread across the economy while limiting labour market disruption.

GCC expansion remains a bright spot

Despite concerns over automation in routine IT and BPS functions, Goldman Sachs said India's technology sector remains resilient, supported by the rapid expansion of Global Capability Centres (GCCs).

While the country's six largest IT services firms have reduced their combined workforce by around 64,000 employees over the past three years, the broader technology services ecosystem, including GCCs, has added about 700,000 jobs, taking total employment to 4.4 million.

Infrastructure, protectionism key risks

The report identified inadequate infrastructure as the biggest challenge to large-scale AI adoption in India. It said the country's current data centre capacity is only around 1 GW, representing roughly 1% of global capacity, highlighting the need for significant investments in computing infrastructure, reliable electricity, water availability and digital networks.

Another risk stems from rising protectionism in major services export markets. Increasing restrictions on cross-border data flows, digital services and AI models—particularly in the US and Europe—could weigh on India's services exports and slow AI adoption.

Lessons from earlier technology cycles

Goldman Sachs said India's previous digital transformation—from internet adoption and smartphones to the India Stack and digital public infrastructure—was driven by falling connectivity costs and expanding infrastructure.

It expects Gen-AI adoption to follow a similar trajectory, with widespread diffusion depending on cheaper computing power, improved digital infrastructure and affordable access.

However, unlike earlier technology waves, Gen-AI capabilities are advancing at a much faster pace, moving beyond text generation to performing increasingly sophisticated knowledge-based tasks. This could generate significant productivity gains, particularly across India's service-led economy, while simultaneously reshaping the country's occupational landscape over the coming decade.