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Goldman Sachs Sees Gen-AI Lifting India's Labour Productivity
According to a Goldman Sachs report, Generative Artificial Intelligence (Gen-AI) is set to be a major contributor to labor productivity increases in India in the next ten years, though its effects on employment will likely vary by sector.
The report estimates that the integration of Gen-AI may boost India's yearly labor productivity growth by approximately 0.4 percentage points in the next decade under its baseline scenario, with gains varying from 0.1 percentage points to 0.8 percentage points depending on the advancements in AI's ability to manage complex tasks.
"Gen-AI can influence labor productivity in India via two primary channels." Initially, it can enhance productivity per employee in jobs affected by AI by automating repetitive tasks and allowing a transition to more valuable activities," the report indicated.
The brokerage expects AI to enhance, rather than substitute, employees in India. It projects that 42-48 percent of non-agricultural jobs might be enhanced by Gen-AI, whereas 8-12 percent could be at risk of replacement. The remaining employees are anticipated to stay mostly unchanged.
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The growth of the IT services sector in the late 1990s and 2000s, along with the implementation of India's digital public infrastructure and increasing smartphone usage, enhanced labor distribution and decreased transaction costs throughout the economy
Workers removed from routine tasks might also experience productivity gains if they are effectively moved into more efficient roles.
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Goldman Sachs stated, "Our initial estimates indicate that the yearly increase in labour productivity growth from Gen-AI implementation in India could be approximately 0.4 percentage points over a decade."
The report highlighted that India has historically achieved significant productivity improvements during past technology adoption phases.
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The growth of the IT services sector in the late 1990s and 2000s, along with the implementation of India's digital public infrastructure and increasing smartphone usage, enhanced labor distribution and decreased transaction costs throughout the economy.
