According to forecasts, generative artificial intelligence (AI) might add between $359 billion and $438 billion to India's GDP by 2029-30, said Michael Debabrata Patra, Deputy Governor of the Reserve Bank of India (RBI), on Wednesday.
AI usage in industrial processes by Indian enterprises increased from 8% in 2023 to 25% in 2024.
"With its digital public infrastructure (DPI), a thriving information technology (IT) sector, and a booming millennial population, India is uniquely positioned to uncover new growth opportunities while optimizing old ones. Generative AI is expected to add $359-438 billion to India's GDP by 2029-30. Indian firms' integration of AI into production processes has increased from 8% in 2023 to 25% in 2024," Patra stated at the DEPR Conference on 'Digital Technology, Productivity and Economic Growth in India' in Jaipur.
He stated that while all Indian banks have incorporated mobile and internet banking, 75 percent provide online account opening, digital KYC, and digitally enabled doorstep banking.
Furthermore, 60% provide digital loans, 50% offer payment aggregator services, 41% utilize chatbots, 24% use open banking, and 10% include Internet of Things (IoT) technology.
"Private sector banks are leading this technology adoption," Patra said the crowd.
The deputy governor emphasized that complementing policies would play an important role in unlocking new economic impulses by capitalizing on the productivity advantages provided by digital technologies.
Patra highlights several policy priorities, including increasing competition to reduce market concentration and efficient resource reallocation.
Patra further stated that generative AI is expected to increase global GDP by $7-10 trillion within the next three years. Large language models alone are predicted to increase worker productivity between 8 to 36%.
Productivity patterns are being altered by the growing importance of digital services and intangible capital, which is being driven by increased company investment in digital technologies.
Prices for digital assets, such as information and communication technology (ICT), continue to fall, allowing firms to run more efficiently and provide competitive products and services.
Technological innovation enhances productivity by improving financial intermediation, diversifying financial goods and services, increasing service delivery efficiency, and employing digital technologies to manage risks. Furthermore, digitization has the potential to improve cross-border financial flows by lowering costs and boosting the speed and transparency of transfers.
He went on to say that the KLEMS (Capital, Labour, Energy, Materials, and Services) framework is useful for quantifying the impact of digitization on labour quality, capital quality, value added, and total factor productivity. This concept implies dividing aggregated capital and labor into ICT capital, human capital, and supplementary investments that use digital assets as production inputs. However, disaggregation can be problematic, especially due to shortages in full data.
