India's path to becoming an advanced economy relies on converting structural strengths into sustained productivity gains: IMF

IMF noted in a recent update that nearly 60 percent of Indian firms already use some form of AIwell above global averages. AI can make businesses more efficient, speed up technology diffusion, and strengthen innovation. But adoption remains uneven: employers cite skill shortages, inadequate tools, and integration challenges, the fund noted. Ensuring that AI enhances productivity without widening disparities requires further investment in Indias already strong digital infrastructure, training workers, and protecting those who may lose jobs.

IMF staff simulations show that AI-driven productivity gainsscaled by AI preparedness and exposurecould raise total factor productivity in emerging Asia (including India) by roughly 0.3 to 3 percentage points over a decadedepending on sectors and scenarios.

India has already laid important foundations for productivity-enhancing reforms and can build on a world-class digital public infrastructure. Unlocking the next wave of growth requires a coordinated agenda: easing regulatory burdens so firms can grow, boosting innovation and university-industry collaboration to promote innovation, strengthening business dynamism, and enabling labor to move to higher-productivity sectors. With these reforms, India can convert its structural strengths into sustained productivity gains, supporting its endeavors to become an advanced economy, IMF noted.

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