A recent Goldman Sachs report, titled "Gen-AI in India: Jobs Crosswinds, Productivity Tailwinds," indicates that generative artificial intelligence (Gen-AI) is poised to enhance India's economic growth by significantly increasing productivity rather than causing widespread job losses. The report suggests that while AI adoption will have wide-ranging effects, the overall impact on the Indian labor market will be positive, with technology complementing more workers than it substitutes.
AI to Augment, Not Just Replace, Indian Workforce
The analysis estimates that Gen-AI could automate 9-17% of tasks currently performed by India's non-agricultural workforce. However, only 8-12% of non-agricultural employment is expected to face substitution risk. Crucially, the report finds that 42-48% of workers are likely to see their roles complemented by AI, enabling them to focus on higher-value tasks.
Occupations involving predominantly physical or manual activities are anticipated to remain largely unaffected by AI's direct substitution. Instead, these roles may benefit from the automation of repetitive tasks, leading to increased efficiency.
Significant Productivity Gains Projected
Goldman Sachs projects that widespread AI adoption could elevate India's annual labor productivity growth by approximately 0.4 percentage points over the next decade under its baseline scenario. Depending on AI's capability to manage more complex tasks, this boost could range from 0.1 to 0.8 percentage points annually.
The largest productivity gains are expected in knowledge-intensive sectors such as media and entertainment, education, and healthcare, where AI can significantly augment human capabilities. In contrast, sectors like construction, textiles, manufacturing, and post and telecom services may experience more modest improvements due to their greater reliance on physical labor.
Varying Sectoral and Occupational Impacts
Healthcare, education, financial, and professional services are identified as key sectors where AI will enhance productivity through applications like diagnostics, personalized learning, and advanced data analytics. Conversely, routine business functions within IT-enabled business process services, as well as postal and telecom services, face a relatively higher risk of substitution dueishing to their repetitive and codifiable tasks.
Occupationally, routine clerical support workers are predicted to face the most disruption. However, physical occupations, craft and trade-related workers, and machine operators could see increased demand as their manual and interpersonal skills remain challenging for AI to automate.
Infrastructure is Key to Realizing AI's Potential
The report emphasizes that harnessing India's AI opportunity hinges on substantial investments in computing infrastructure, data centers, a reliable power supply, and robust digital infrastructure. With India currently accounting for only about 1% of global data-center capacity, expanding this infrastructure is critical for scaling AI adoption across the economy. Goldman Sachs advocates for deploying AI primarily as a productivity-enhancing tool rather than a labor-substituting one to maximize economic gains and minimize labor-market disruption.