AI and Economic Progress in India
AI is revolutionizing India's progress by accelerating innovation and addressing complex problems. However, traditional economic measures fail to capture these changes, as they are based on older models of factories and physical goods.
Limitations of GDP as a Measure
- GDP Obscurities: GDP data can be misleading as output may rise while natural resources deplete and inequality grows.
- Scope Limitation: The formal economy in India only includes around half of the workforce, thus GDP doesn't fully represent true prosperity.
Digital Transformation and Measurement Challenges
- Digital Economy Growth: India experienced a surge in digital transformation post-2015 with initiatives like Digital India.
- Incorporation Lag: The digital economy accounted for about 11-12% of GDP in 2022-23, but full integration of GST, UPI, and platform data into national statistics is pending until 2025-26.
AI's Economic Impact and Measurement Needs
- Global Debate: Discussions oscillate between productivity gains and job loss fears, akin to the dotcom era.
- Informal Sector Challenges: With over 80% workforce in informal sectors, capturing productivity and efficiency from AI is challenging.
- New Accounting Methods: There's a need for accounting that measures time, skills, and agency rather than just output.
Sustainability and Employment Concerns
- Sustainability Trade-offs: While AI optimizes energy use, the environmental cost of data centers and model training is significant.
- Job Displacement Risks: Automation may outpace the creation of new sectors, threatening low-productivity jobs.
Education and Innovation
- Education as Infrastructure: Understanding learning as a core component of infrastructure is essential for the AI era.
- Digital Literacy: Digital skills are critical, yet unevenly distributed, with few workers receiving adequate digital training.
Rethinking National Accounts
- Intangible Assets: Alongside GDP, tracking digital infrastructure, data quality, and social capital is necessary.
- Public Allocation: India's spending on health and education is below global norms, contrasting with investments in AI.
For AI to truly benefit India's economy and society, a holistic approach to measurement that includes human capabilities, social investment, and sustainable practices is crucial.
