AI-powered trade revolution: Opportunities and challenges for India

AI is transforming global trade, offering opportunities and challenges. India must adapt its policies, leveraging AI for export growth and addressing regulatory issues

With exponential increases in data generation and computational power, artificial intelligence (AI) is becoming more complex yet offers simpler solutions for several real-life problems. AI is being used in business, educational, scientific, governmental, and consumer applications, thus having far-reaching implications for international trade.

 

In the context of trade, AI could be a general-purpose technology for more efficiently producing goods and services. As intellectual property (IP), it could be a part of the product (whether good or service) and be traded (such as AI-powered mobile phones and software applications). Other times, it could be just an enabler of trade, such as an AI-enabled system for risk assessment at border control.

 

 

Evidently, AI is impacting trade in myriad ways, whether it is traditional goods trade, services trade, IP, or a technology embedded in the infrastructure for trade facilitation.

 

AI-driven trade opportunities

 

AI presents tremendous opportunities for boosting global trade and GDP. According to a World Trade Organisation (WTO) study, under a “global synergy” scenario of universal AI adoption, trade growth could increase by 14 per cent through 2040, while cautious, uneven adoption might yield only 7 per cent growth. It also suggests that high-income economies are poised to gain the most in productivity, whereas low-income economies could see reduced trade costs if they invest in digital infrastructure, innovation, and regulatory capacity.

 

With the potential to reshape the comparative advantages of economies, lower trade barriers, and create new sectors for trade, AI could enable developing countries and small and medium enterprises (SMEs) to access global markets more effectively.

 

As India targets achieving $2 trillion exports by 2030, it must fully utilise AI opportunities to boost its export potential and take into account AI's impact on global trade to adapt its trade policies.

 

The growth of AI is fuelling demand for various goods, including ICT products (IoT devices, camera systems, semiconductor chips, and computer systems) and automation systems with applications in different sectors — agriculture (micro irrigation), transportation (drones), and food processing (quality inspection), as well as their downstream products, including raw material.

 

In this context, India’s emphasis on creating an electronics manufacturing ecosystem through schemes such as Production Linked Incentives (PLI) for mobile devices, IT hardware, and electronic components, and implementing India Semiconductor Mission (ISM) are timely interventions. According to estimates by the India Cellular and Electronics Association (ICEA), India’s total electronics production in FY24 stood at $115 billion, with exports accounting for $29 billion, up 23.6 per cent compared to a year ago.

 

AI is also expected to revolutionise trade in services, especially those delivered digitally. It is enhancing productivity by streamlining and automating manual processes, having a significant impact across various service sectors.

 

For example, it has become much easier to create global educational content in multiple languages by leveraging AI-driven translation tools. Similarly, with its powerful data processing capabilities, AI is enabling highly accurate remote diagnoses. Therefore, the most significant impact of AI would be as an enabler of the cross-border services trade (also called Mode 1) even for those sectors that traditionally relied on people travelling across borders to deliver services (under Mode 3 or Mode 4), such as educational, health, and other professional services.

 

WTO research suggests that cumulative trade growth in digitally delivered services in sectors like education, human health, recreational, insurance, and financial services, among others, will be the highest, with more than 40 per cent growth projected during 2023-40.

 

Technological innovations could be another gamechanger in AI-driven trade, as demonstrated by the disruption caused by China’s AI startup DeepSeek. Such innovations could democratise the AI ecosystem by reducing capital requirements, increasing the technology adoption rate, and bringing rapid scalability, benefiting small companies and tech startups. Such innovations may also provide opportunities for Indian companies, particularly SMEs and startups, to use AI for enhancing productivity at affordable costs.

 

Challenges of AI adoption

 

The gains of AI come with associated risks. For example, AI could negatively impact jobs in the services sectors relying on manual processes and could altogether reduce the necessity of outsourcing certain services, such as AI-enabled chat boxes taking over conventional call centres.

 

Further, improved productivity will impact some “white-collar jobs” as well. The World Economic Forum (WEF) Future of Jobs Report 2025 states that 86 per cent of global employers surveyed expect AI and information processing technologies to have the biggest impact on their businesses and jobs.

 

AI’s development, accuracy, and innovation depend on access to high-quality, diverse datasets. While the Trade-Related Intellectual Property Rights (TRIPS) Agreement provides foundational IP protection for AI technologies, AI is already disrupting traditional IP frameworks. Serious questions are being raised about the legal status of AI as an inventor, the transparency of algorithms, and the use of copyrighted material for AI training.

 

Further, AI’s dual-use potential introduces cybersecurity risks and concerns regarding responsible AI. At the WTO’s Technical Barriers to Trade (TBT) Committee, to date, more than 90 cybersecurity-related TBT measures have been introduced, emphasising the need for coordinated global cybersecurity standards to avoid trade disruptions.

 

While AI offers substantial opportunities to enhance global trade, realising these benefits requires international cooperation to address challenges such as regulatory fragmentation and the potential AI divide.

 

AI governance and trade rules

 

The global AI regulatory landscape is still evolving, with no single plurilateral or multilateral body overseeing all aspects comprehensively. However, several plurilateral principles are emerging, such as OECD AI Principles (2019), G20 AI principles (2019), the Council of Europe AI Convention drafting group (2022–2024), and the GPAI Ministerial Declaration (2022). On the international stage, AI governance discussions are taking place at the United Nations, which has established a multi-stakeholder High-level Advisory Body on Artificial Intelligence (HLAB-AI). Additionally, the International Telecommunication Union (ITU) is working on preparing relevant standards for AI.

 

Global trade rules must evolve to address the issues of technological neutrality, data governance, and competition. AI is already being impacted by global trade rules under the WTO and various bilateral free trade agreements (FTAs) and regional trade agreements (RTAs). These agreements are increasingly incorporating disciplines on data flow, data privacy, personal data protection, e-commerce, and digital trade.

 

According to the trade policy paper by López-González et al, published by OECD in 2023, the number of RTAs with digital trade provisions has grown significantly. By the end of 2022, 116 RTAs — accounting for 33 per cent of all existing RTAs — contained provisions related to digital trade. In this context, ongoing discussions on e-commerce and the existing Work Programme on e-commerce at the WTO could also influence the use of AI. The WTO plays a critical role in integrating AI into trade policy discussions, particularly within the framework of GATT, GATS, and TRIPS agreements, which are part of the WTO system.

 

India is strategically positioned to seize the opportunities offered by AI, thanks to its vast talent pool, skilled workforce, and the significant presence of global capability centres (GCCs) established by leading global tech companies. As a major exporter of services, India should focus on significant R&D investment in AI by both the public and private sectors and re-skilling and up-skilling its workforce, with particular emphasis on equipping them to effectively use AI tools. India's consistent rise in global innovation rankings—moving from 66th in 2013 to 39th in 2024—demonstrates a strong foundation on which to build.

 

As the co-chair of the 'AI Action Summit' in Paris on February 10-11, India should also take the lead by driving the agenda for the Global South on trade aspects of AI, including within the WTO, while taking steps to create a trade policy environment that facilitates the export of AI-based goods and services.

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Gaurav Gupta is an IFS officer and Dr Rupanjali Karthik is an IAS officer at the Government of India

 

Disclaimer: These are the personal views of the writers. They do not reflect the views of www.business-standard.com or the Business Standard newspaper