The AI opportunity

Threat to job creation should be addressed

Microsoft Chief Executive Officer Satya Nadella’s recent statement on skilling up two million Indians in the use of artificial intelligence (AI) signals the multinational corporation’s desire to shape the Indian AI ecosystem in a big way. Mr Nadella also noted AI could contribute around 10 per cent of India’s gross domestic product by the time the $5 trillion mark is achieved, and Indian firms should not sit on the sidelines. While Microsoft has a headstart in generative AI due to its ties with OpenAI, other big players such as Google and Nvidia are also looking to embed themselves in this field. In addition, there are multiple startups in this space and, paradoxically, a slowdown in hiring in information technology (IT) services could be a boon for AI-related outfits. The Indian IT services sector is estimated to have hired only around 80,000 engineers from campus in 2023-24 — the lowest fresh hiring in decades. However, many “surplus” engineers could now migrate to AI-related setups as investment in this space is expected to increase.

Apart from India’s famed expertise in software, it possesses several other advantages as a testing and training ground for AI. One is sheer diversity. There are eight to 10 Indian languages with over 50 million speakers each and a rich vernacular literature. Conceivably, that could lead to the development of many variations on ChatGPT set in various Indian languages. Another advantage for India is the sheer scale of data generation. Thanks to a combination of cheap data plans, high smartphone penetration, and a thrust towards providing services via the digital public infrastructure, India has the highest data consumption in the world. The rollout of 5G services and satellite broadband promises to generate even more data at an ever increasing pace. As 5G catches hold, it will also enable a host of internet of things-related use cases and other machine-to-machine enterprise applications that rely on high-speed and AI algorithms. The availability of data makes India an ideal training ground for AI.

Government policy also contemplates ramping up AI-related research and a significant increase in computing capacity. The policy also has a strong focus on building indigenous capacity in electronics hardware and semiconductor fabrication — India is already a leading hub for chip design. Several academic institutions such as IIT Madras already have testbeds and research labs focused on AI-related areas. Given a vibrant startup ecosystem, private-sector research on AI is expected to throw up investment opportunities as well. As AI catches hold, experts believe it could transform sectors like agriculture, logistics, energy, health care, and financial services. There are low-hanging fruit in these sectors in terms of inefficiencies that AI may help address. As Indian firms adopt AI in different functions over time, it is likely to improve efficiency and profitability. It is also likely to create jobs requiring sophisticated skills. However, it would replace the need for humans in various functions. In fact, even large Indian IT firms working with labour cost advantages may suffer. While the adoption of AI can increase efficiency domestically, and it is an opportunity for India to develop solutions for the world, it could potentially affect the level of job creation at the aggregate level and increase inequality. Such unintended consequences will need to be proactively addressed.