Gen-AI to boost India's labour productivity by 0.4 percentage points annually over next decade: Goldman Sachs
Mumbai, July 29
Generative Artificial Intelligence is poised to become a significant driver of labour productivity growth in India over the coming decade, even as its impact on jobs is expected to be uneven across sectors, according to a Goldman Sachs report.
The report projects that the adoption of Gen-AI could raise India's annual labour productivity growth by around 0.4 percentage points over the next 10 years under its baseline scenario, with the gains ranging between 0.1 percentage points and 0.8 percentage points depending on how advanced AI becomes in handling complex tasks.
"Gen-AI can affect labour productivity in India through two main channels. First, it can raise output per worker in AI-exposed occupations by automating routine tasks and freeing up time to shift toward higher-value tasks," the report said.
The brokerage believes AI will primarily augment, rather than replace, workers in India. It estimates that 42-48 per cent of non-agricultural employment is likely to be complemented by Gen-AI, while 8-12 per cent could face substitution risk. The remaining workforce is expected to remain largely unaffected.
According to the report, the productivity gains would stem from AI automating repetitive work, allowing employees to focus on higher-value analytical, supervisory and client-facing roles. Workers displaced from routine functions could also see productivity improvements if they are successfully redeployed into more productive jobs.
"Our baseline estimates suggest that the annual boost to labour productivity growth from Gen-AI adoption in India can be around 0.4pp over a 10-year period," Goldman Sachs said.
The report noted that India has previously experienced meaningful productivity gains during earlier technology adoption cycles. The expansion of the IT services industry in the late 1990s and 2000s, followed by the rollout of India's digital public infrastructure and rising smartphone penetration, improved labour allocation and reduced transaction costs across the economy.
Knowledge-intensive sectors are expected to benefit the most from Gen-AI adoption. Media and entertainment, education, healthcare and parts of financial services are likely to witness the strongest productivity improvements because AI can complement skilled workers by assisting in tasks such as diagnostics, data analysis, research and personalised learning. In contrast, manufacturing, construction and textiles are expected to see relatively modest gains because a larger share of work in these industries remains physical in nature.
The report estimates that Gen-AI could automate 9-17 per cent of current non-agricultural work tasks in India, depending on the complexity of tasks AI becomes capable of performing. However, it argues that the broader labour market impact will depend on whether AI complements workers by enhancing productivity or substitutes existing jobs.
Sectors such as healthcare, education, financial services and Global Capability Centres (GCCs) appear well positioned to use AI to raise worker productivity rather than replace labour.
At the same time, the report cautioned that India's AI opportunity would depend on significant investments in digital infrastructure, including data centres, affordable computing capacity, reliable electricity and water, as well as continued expansion of the country's technology ecosystem.
— ANI
Reader Comments
Main concern is jobs, yaar. Goldman Sachs says 8-12% substitution risk in non-agricultural sectors. That's lakhs of people potentially losing jobs to AI. And we already have a massive unemployment problem. I get that AI can complement workers, but what about those who can't upskill easily? Need better social safety nets, not just rosy projections. 😕
As someone working in a GCC in Bangalore, I can already see the changes. Our teams are using AI for data analytics and it's definitely improving efficiency. But here's the catch: the report says we need massive investments in data centers and reliable electricity. India still has power issues in many states. Hope the infrastructure keeps up with the ambition.
I'm cautiously optimistic. The report mentions sectors like healthcare and education benefiting the most. Imagine AI helping doctors in rural areas with diagnostics or teachers creating personalized lessons for each student. That could be a game-changer for India's inclusivity. But we need to ensure these tools reach the grassroots, not just urban centers. Let's hope policymakers take this seriously.
Hmm, interesting data but I'm skeptical about the 0.4% figure. These projections often assume smooth adoption, but Indian companies can be slow to change, especially small and medium enterprises. Plus, the report itself says the range could be as low as 0.1% if AI doesn't advance enough. We've seen similar hype with blockchain and IoT – let's wait and watch how Gen-AI actually pans out on the ground.
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