AI’s Disruptive Economic Impact, An India Check

Context:

• The recent rise of Large Language Models and Generative AI has sparked more interest in the progress of AI across the globe.
• However, the subjects of worker replacements and economic growth with the rise of AI have entered the spiral that the Internet once went through.

Positive effects of AI adoption:

• Increased Worker Productivity: There is broad consensus on increasing productivity by adopting AI in producing goods and services.
• Improved Customer Satisfaction: AI tools boosted worker productivity by 14% and improved consumer satisfaction, leading to better treatment of customer service agents and increased employee retention. 
• Increase in GDP: An increase of 14% is predicted in global GDP by 2030 due to ongoing technological advancements in AI. 
• Reduction in Human Error: One of the biggest advantages of Artificial Intelligence is that it can significantly reduce errors and increase accuracy and precision.
• Faster Decision-making: Faster decision-making is another benefit of AI. By automating certain tasks and providing real-time insights, AI can help organizations make faster and more informed decisions.
• Imitating human behaviour: Generative AI has the potential to create human-like output as well as the ability to break down communication barriers between humans and machines which could have large positive macroeconomic effects.

Negative Effects of AI Adoption:

• Labour Replacement: AI can automate repetitive tasks and with generative AI, even creative tasks can be done efficiently and fast. Thus, the technology brings with it the risk of labour replacement. 
• Impact on blue-collar workers: Robot adoption has a negative effect on workers, as it reduces the labour share, employment and wages. These adverse effects primarily affect blue-collar workers and individuals with lower levels of education.
• Increase in social Inequalities: Distributional concerns over automation, causing inequality among workers and possible serious negative impacts on social welfare. 
• Technological Divide: AI may intensify competition and deepen the technological divide among firms. Early adopters of AI may gain significant advantages, leading to a winner-takes-all scenario.
• Disrupting white coloured jobs: AI could be highly disruptive as it is more likely to displace middle-class, white-collared jobs; in comparison, earlier technological advancements displaced people from lower-paid farm jobs to higher-paid factory floor jobs. 

Way Forward for India:

• Upskilling and Education: 
  • India, the world’s most populous nation, needs to be vigilant since any net negative impact on employment could have a severe influence on the global economy. 
  • The greatest economic gains from AI will come from China, with a projected 26% boost to GDP by 2030. Thus, it would be prudent for India to focus more on education and training in AI.
• Increased cyber regulations: 
  • Governments would have to step up their cyber regulations with respect to the new challenges posed by AI and may also need tax capital, as suggested by many experts, to balance the returns from capital and labor to reduce the displacement and distributional effects. 
• Structural Transformation: 
  • AI could create deep challenges for society, including in the labor market, politics, data privacy, crime and warfare; these challenges are difficult to anticipate and plan for. 
  • Restructuring business processes and increased investments are essential to fully leverage AI’s productivity potential.
  • Ever-growing advancements in AI are now a reality and equipping ourselves with the latest tools will help us forge ahead along with everyone else.

News Source: The Hindu