‘Crisis or catalyst?’: Economic Survey calls for analysing AI impact on workforce ‘very seriously’

The 2024-2025 economic survey elucidated the challenges Artificial Intelligence (AI) poses in the Labour Market. The 436-page survey was presented by Finance Minister Nirmala Sitharaman a day before she was scheduled to present this year’s union budget. In the survey, Chief Economic Advisor V Anantha Nageswaran and his team emphasised how the perception of AI has changed dramatically in recent years.

The survey pointed out that OpenAI has managed to initiate an “arms race” in developing AI technology among the big tech firms since 2022. They argued that the “AI revolution” ushered in a new age where valuable work could be automated, and the large-scale use of AI could lead to labour displacement.

It conveyed the fears of large-scale AI adoption to that of the challenges brought in by the previous industrial and technological revolution. The survey pointed out that the Indian economy is predominantly service-oriented, with a large portion of its IT workforce usually engaging in low-value-added services. “These roles are particularly vulnerable to automation, as companies may replace labour with technology to reduce costs,” the survey reads.

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Here’s how the economic service highlighted the challenges AI poses to policymakers and AI developers:

Challenges for the policymakers

The survey warned that policymakers should seriously consider the challenges posed by the large-scale use and over-reliance on AI. It is suggested that the policymakers should “Minimise the negative impacts of creative destruction,” and carry out collective societal efforts to protect Indian labour.

This can be through the creation of new social infrastructure to facilitate inclusive growth. “India will, therefore, have to fast track the creation of robust institutions through a tripartite compact between the government, private sector and academia,” the survey suggested.

When it comes to social infrastructure, the economy survey advised the creation and promotion of “Enabling Institutions, Insuring Institutions and Stewarding Institutions,” which will help our workforce to graduate towards medium and high-skilled jobs, where AI can be used to augment the task and not replace them.

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However, the survey pointed out that building these institutions can be a time-consuming process and requires a massive amount of intellectual and financial resources. “Fortunately, due to AI presently being in its infancy, India is afforded the time necessary to strengthen its foundations and mobilise a nation-wide institutional response,” the survey stated.

Challenges for AI developers

Apart from this, the economic survey also made recommendations for AI developers to ensure a more inclusive future. It stated that “practicality and reliability” are two core issues that AI developers need to address before the widespread adoption of the technology is achieved.

The survey also called for greater infrastructure scaling but acknowledged that the process would take time. They urged the developers to focus on AI models that will target efficiency gains without compromising on performance. “Leveraging its young, dynamic, and tech-savvy population, India has the potential to create a workforce that can utilise AI to augment their work and productivity,” the survey stated.

“Policymakers must balance innovation with societal costs, as AI-driven shifts in the labour market could have lasting effects. Similarly, the corporate sector must act responsibly, handling the introduction of AI with sensitivity to India’s needs,” it concluded, highlighting the need to establish collaborative efforts between between government, private sector, and academia.