Implications of Artificial Intelligence for the Indian Economy

General purpose technologies (GPTs) such as artificial intelligence (AI) spur innovational complementarities that are widely dispersed, and require co-ordination across the state, private actors 51 and a range of institutions to realise potential gains. The impact and use of AI, specifically machine learning (ML)-driven AI spawns multiple sectors in society. Policy action, therefore, must recognise the range of uses across sectors and the potential impact of such technological improvements. The study has adopted a two-pronged approach: (a) an econometric estimation to assess the benefits of AI, including its implications on total factor productivity, using data on Indian firms in the manufacturing and services sector for the period 2007 to 2017 and (b) a micro-level analysis using case study illustrations that capture the organisational and firm-level response to the availability of the technology. The study finds that AI has a positive and significant impact on total factor productivity growth for firms in India. The estimate is marginally higher for services sector firms. The research also captures the role of institutions that allows for responsible diffusion of AI, recommending the use of industrial policy to facilitate its appropriate adoption and facilitate its ethical and non-discriminatory application.