Economic Survey: Can AI Derail India's Growth? A Path to Viksit Bharat

The Indian economy: resilient, yes, but ready for the future? That's the million-rupee question tackled in the recently presented Economic Survey 2023-24. Authored by Chief Economic Advisor V. Anantha Nageswaran, the survey paints a picture of promise, laced with a dose of sobering reality.

Growth Story: A Decade of Resilience

India's economic journey over the past decade has been one of unwavering resilience. The survey credits the country's institutional strength for navigating multiple challenges. From a low-income nation to a low-middle-income one, India's transformation is a testament to successful government reforms. However, with rising aspirations of its people as India marches towards middle and upper-middle-income status, the need for evolving strategies intensifies.

TICE LIVE: Chief Economic Advisor's Insights on Economic Survey 2023-24

The Six Pillars of "Viksit Bharat"

The survey proposes a strategic six-pronged approach to propel India towards sustainable, balanced, and inclusive growth:

1. Private Sector Takes the Wheel: Organic growth in private sector capital formation is crucial for job creation and fair income distribution.
2. Green Transition: A Public-Private Handshake: Innovative financing tools will be key to mobilizing private capital for India's green initiatives.
3. MSMEs: Bridging the Credit Chasm: Deregulation, enhanced connectivity, and an export-focused strategy are essential for empowering MSMEs to scale up.
4. Agriculture: A Growth Engine Rebooted: Farmer-friendly policies that are environmentally sustainable will unlock the sector's true potential.
5. Skilling for the Future: Laser-focused education and skill policies, inspired by global models like the EU Cohesion Policy, are imperative.
6. State Up, Growth Up: Investment in state machinery is vital to sustain and accelerate India's progress amidst evolving challenges.

AI, Geopolitics: The New Frontier of Challenges

The survey acknowledges the headwinds India faces: emerging geopolitical concerns, climate change, and the enigmatic influence of Artificial Intelligence (AI) on the workforce. These factors could potentially impede India's high growth trajectory in the coming years.

The advent of AI introduces a considerable uncertainty regarding its impact on workers across all skill levels. These factors are expected to create barriers to sustained high growth rates for India in the coming years and decades.

The economic survey stated, "The advent of Artificial Intelligence casts a huge pall of uncertainty as to its impact on workers across all skill levels – low, semi and high. These will create barriers and hurdles to sustained high growth rates for India in the coming years and decades. Overcoming these requires a grand alliance of union and state governments and the private sector."

The Indian government has issued a cautionary note regarding the potential negative impacts of artificial intelligence (AI) on the labor market. According to recent assessments, AI is expected to affect workers across all skill levels, creating significant obstacles to maintaining high growth rates for the country over the coming years and decades. The Economic Survey highlights that as AI increasingly permeates various economic activities, the labor market will need to evolve to navigate these technological shifts while promoting collective welfare.

AI’s Impact on the Services Sector

The survey reveals that AI could constrain growth opportunities within the business services sector, presenting a major challenge for job creation and the long-term sustainability of India’s services industry. Effective urban development, particularly in cities with substantial global market potential, will be crucial for the growth and stability of the services sector.

Employment: Private Sector, Step Up!

The survey raises a critical point – the private sector's role in employment generation. Nageswaran highlights the issue of bad debts and high corporate indebtedness, amplified by the pandemic. Despite robust financial performance with quadrupled profits before tax, hiring and compensation haven't kept pace. The survey urges India Inc. to increase hiring and worker compensation, particularly with the tax cuts implemented by the government to facilitate capital formation.

Investment Trends: A Deeper Dive

The survey reveals an interesting dichotomy in private sector investment trends. While cumulative growth in non-financial GFCF has been impressive at 52% between FY19-FY23, the distribution is uneven. Investment in machinery, equipment, and intellectual property products, crucial for manufacturing competitiveness and high-quality jobs, has lagged behind.

The Road to "Viksit Bharat"

The Economic Survey 2023-24 serves as a roadmap for India's medium-term growth. It emphasizes the need for bottom-up, next-generation reforms. From navigating geopolitical complexities and AI's impact to fostering public-private partnerships, empowering MSMEs, and bolstering state capacity, India's journey to becoming a developed nation by 2047 requires a multi-pronged approach. However, the survey makes a clear call to action: India Inc. must step up and become a significant contributor to this ambitious vision.

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