Artificial Intelligence (AI) Breakthrough

AI’s disruptive economic impact, an India check


From UPSC perspective, the following things are important :

Prelims level: AI generative models, Latest AI applications

Mains level: Artificial Intelligence and generative models, Benefits, challenges, way ahead


What is the news?

  • The rise of Artificial Intelligence (AI) and generative AI models and its impact on productivity, growth, and employment is explored, with a focus on the positive effects, potential job displacement, and opportunities for India, while dispelling fears of a robot-dominated future.

Central Idea

  • The rapid advancements in AI, particularly in the form of Large Language Models and Generative AI, have revolutionized various aspects of our lives. From automated factories to self-driving cars and chatbots, AI has extended its influence beyond our expectations.

What is Artificial Intelligence?

  • AI is a constellation of technologies that enable machines to act with higher levels of intelligence and emulate the human capabilities of sense, comprehend and act.
  • An AI system can also take action through technologies such as expert systems and inference engines or undertake actions in the physical world.
  • These human-like capabilities are augmented by the ability to learn from experience and keep adapting over time.

What is generative AI?

  • Like other forms of artificial intelligence, generative AI learns how to take actions from past data.
  • It creates brand new content – a text, an image, even computer code – based on that training, instead of simply categorizing or identifying data like other AI.
  • The most famous generative AI application is ChatGPT, a chatbot that Microsoft-backed OpenAI released late last year.
  • The AI powering it is known as a large language model because it takes in a text prompt and from that writes a human-like response.

Potential positive economic impact of AI

  • PwC Report: The PwC report predicted an increase in global GDP by 14% or $15.7 trillion by 2030 due to ongoing technological advancements in AI. It also suggests that the greatest economic gains from AI will come from China, with a projected 26% boost to GDP by 2030.
  • Goldman Sachs Research: According to the Goldman Sachs Research report, generative AI alone could raise global GDP by 7% or almost $7 trillion over a 10-year period.
  • Forum for the Kent A. Clark Center for Global Markets Survey: The survey conducted among economic experts revealed that 44% of U.S. experts expected a substantial increase in GDP per capita due to AI, while 34% of European experts expected the same.

Positive effects of AI adoption

  • Increased productivity: A study conducted by economists from the Massachusetts Institute of Technology (MIT) called Generative AI at Work revealed that AI tools improved worker productivity by 14% and enhanced consumer satisfaction among customer service agents.
  • Improved consumer satisfaction: AI tools have contributed to better treatment of customer service agents, leading to improved consumer satisfaction.
  • Employee retention: The use of AI tools in the workplace has been associated with increased employee retention rates, possibly due to the enhanced productivity and job satisfaction resulting from AI support.
  • Faster and smarter work: A recent survey among employees of LinkedIn’s top 50 companies in the United States shows that almost 70% of them found AI helping them to be faster, smarter, and more productive
  • Potential for significant GDP growth: Research by PwC suggests that ongoing advancements in AI could lead to a projected increase in global GDP by 14% or $15.7 trillion by 2030.
  • Creation of human-like output: Generative AI has the potential to generate human-like output, which can have positive macroeconomic effects by facilitating better communication and interaction between humans and machines.

Employment challenges

  • Labor replacement: AI technologies have the capability to automate both repetitive and creative tasks, potentially leading to the displacement of certain jobs.
  • Negative impact on wages and employment: Studies indicate that the adoption of robots and automation can have a negative effect on wages, employment, and the labor share. This impact is particularly observed among blue-collar workers and those with lower levels of education.
  • Wage inequality: Automation and AI contribute to wage inequality by affecting worker groups specializing in routine tasks. Changes in the wage structure over the last few decades can be attributed to the decline in wages for workers engaged in routine tasks in industries undergoing automation.
  • Intensified competition and winner-takes-all scenario: The adoption of AI may intensify competition among firms, potentially leading to a winner-takes-all scenario where early adopters gain significant advantages.
  • Displacement of middle-class jobs: AI technologies, especially in white-collar industries, may displace middle-class jobs, posing challenges for those in such occupations. The impact of AI on middle-class employment remains uncertain, potentially leading to job losses in these sectors.

Opportunities for India

  • Embracing the demographic dividend: India’s large population presents an opportunity to leverage the demographic dividend. By investing in AI education and training, India can harness the potential of its workforce and utilize AI to drive economic growth and create employment opportunities.
  • Focus on online education: The pandemic has increased acceptance and reliance on online education. India can take advantage of this trend and utilize online platforms to offer AI education and reach a wider audience, further accelerating the adoption of AI skills across the country.
  • Potential economic gains: The PwC report suggests that China is projected to experience the greatest economic gains from AI. However, India can still benefit by focusing on AI education, innovation, and creating an ecosystem that fosters AI-driven growth. By doing so, India can tap into the economic benefits associated with AI and boost its own GDP.

Way forward

  • Collaborative approach: Governments, industry, academia, and civil society should collaborate to shape the future of AI in a manner that benefits society as a whole. Open dialogues, partnerships, and knowledge sharing can drive responsible AI development.
  • Lifelong learning: Promoting a culture of lifelong learning and continuous skill development is crucial. This includes investing in education and training programs that cater to the changing demands of the AI-driven job market.
  • Regulatory frameworks: Governments need to develop agile regulatory frameworks that strike a balance between innovation and accountability. These frameworks should be adaptable to evolving technologies and address potential risks associated with AI.
  • Research and innovation: Continued research and investment in AI can drive innovation, especially in areas such as explainable AI, ethics, and responsible AI practices. Encouraging interdisciplinary collaboration and supporting AI research can lead to breakthroughs in addressing challenges and maximizing benefits.
  • Inclusive approach: Ensuring inclusivity in AI development and deployment is vital. Diversity in AI teams and the inclusion of diverse perspectives can help mitigate biases and ensure AI systems serve the needs of all individuals and communities.


  • Artificial Intelligence has permeated various sectors of the global economy, offering substantial benefits in terms of productivity and growth. While concerns regarding job displacement persist, the full extent of AI’s impact on employment remains uncertain. Governments should proactively address the challenges posed by AI while promoting education and training in AI-related fields.

Also read:

Artificial Intelligence (AI) in Healthcare: Applications, Concerns and regulations

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