Govt, pvt sector should think of mid-term AI consequences: CEA Nageswaran

He said that labour should be treated as a resource and asset since it involves humans with emotions

Artificial intelligence (AI) can both augment and displace labour, and there is a need to choose the right balance between the two. The onus is as much on the government as on the private sector to consider the medium-term consequences of AI, Chief Economic Advisor (CEA) V Anantha Nageswaran said on Wednesday.

“If we have to avoid the social consequences of capital-intensive or technology-intensive growth… we need a greater compact between the private sector, government, and the public so that we can enjoy the demographic dividend and achieve our dreams of becoming a developed nation by 2047 while maintaining both social and economic stability,” Nageswaran said while addressing an event by the All India Management Association, highlighting the importance of finding the right balance between capital and labour.

The CEA said that labour should be treated as a resource and asset since it involves humans with emotions. He said that viewing capital and labour purely from the economic framework of scarcity versus surplus is the wrong approach. He cited the example of how treating labour as a commodity has led to the erosion of small towns and cities in the developed world.

Stressing that female labour force participation in urban India hasn’t returned to pre-Covid levels, the CEA said that post-pandemic, the Indian industry has increasingly adopted flexible labour arrangements, leading to lower wages and benefits.

“From 2019-20 to 2022-23, corporate profits increased fourfold,” he highlighted.

However, noting some positive developments, Nageswaran said that the number of firms with more than 100 workers has grown faster than the number of firms with fewer than 100 workers.

“There is a need for the creation of jobs with protection, regular salary payments through banking channels, and post-employment retirement benefits and health insurance,” the CEA added.

Nageswaran said that since it is not known what the looming presence of AI will do to services sector employment, one should not or cannot abandon the agriculture sector itself as a source of employment generation.

Earlier in the day, while speaking at an event by the Federation of Automobile Dealers Associations, the CEA said that the sale of automobiles is an important barometer of consumer demand and private consumption, and he is confident that sales of automobiles will pick up in the coming months in urban areas.

“In the first five months of this financial year, rural sales of automobiles outpaced urban India. In the first three months of this financial year, there was a general election, and public capital expenditure (capex) was also somewhat slower. As this picks up speed and more contracts are awarded, and the flow of liquidity improves along with private sector capex, it will automatically lead to an improvement in urban demand as well in the coming months with respect to automobile sales,” he added.