The Economic Survey 2024-25 tabled in Parliament today highlights the critical role of artificial intelligence (AI) in the labour markets. In its chapter, 'Labour in the AI Era: Crisis or Catalyst?', the Survey says AI's rapid advancement presents unprecedented opportunities and significant challenges for labour markets worldwide. "Anxieties about the effects of AI remain high in India, considering our country is a services-led economy," says the Survey.

The Survey says concerns and fears about AI disrupting labour markets have intensified over the last four years. "The increasing complexity of the models being developed today represents a paradigm shift in the field of AI. The founder of the AI research and deployment company OpenAI recently stated in a blog post how they are expecting to have office-ready ‘AI workers’ by the end of 2025."

It says OpenAI has initiated an ‘arms race’ in AI as between 2022 and 2024, many companies, including big tech firms, have scrambled to capitalise on the demand for AI. The Survey cites an IIM Ahmedabad Survey, which highlights how among white-collar workers, 68 per cent of the surveyed employees expect their jobs to be partially or fully automated by AI within the next five years.

"As policymakers, it is important to pay attention to the evolving technological landscape and the potential impact it can have on the labour market," the Survey Suggests. It advocates for an "inclusive approach" in tackling such disruption caused by AI. "Historical parallels with earlier technological revolutions reveal the critical role of inclusive institutions in managing disruption and ensuring equitable outcomes."

The Survey says India can benefit from AI emergence as its demographic advantage and diverse economic landscape position it uniquely to benefit from it. "These challenges, along with AI’s experimental nature, create a window for policymakers to act."

But to achieve this, there is a need to ensure "significant investments in education and workforce skilling, supported by enabling, insuring, and stewarding institutions". It says by fostering collaboration between policymakers, the private sector, and academia, India can align AI-driven innovation with societal goals.

Notably, the number of AI patents granted globally increased 62.7 per cent to just over 62,000 between 2021 and 2022. Similarly, the annual global private investments in Generative AI surged from $3 billion in 2022 to $25.2 billion by the end of 2023. Between 2021 and 2023, global corporate investments in all types of AI totalled $761 billion, the data shows.

The priority, says the Survey, should be the minimisation of risks since they can never be fully mitigated. "That is the price of innovation-induced creative destruction. The various types of institutions detailed in this section can provide a much-needed support system to ease the pains of a transition."

Notably, the International Monetary Fund states that AI poses risks of job displacements, notably for emerging markets and developing economies, which are not well placed to leverage the technology relative to the advanced economies. The International Labour Organisation estimates that nearly 75 million jobs globally are at complete risk of automation due to AI. Estimates from private sector firms paint a similar picture. Goldman Sachs economists state that nearly 300 million full-time jobs remain exposed to AI-driven automation. McKinsey estimates demonstrate how, by 2030, up to 30 per cent of current work hours could be automated by generative AI across Europe and the United States.

Job loss due to AI

AI anxiety high in India; OpenAI has started 'arms race': Economic Survey