What India Needs To Benefit From AI — Economic Survey Explains

India is poised to benefits from the rapid advancements in artificial intelligence, but needs to take a slew of key measures to reap those benefits, according to the Economic Survey 2025 released on Friday.

The survey, which is a precursor to the Union Budget for financial year 2025-26, listed some of the focus areas for the government in order to maximise benefits from AI-driven innovations.

"Barriers to large-scale AI adoption persist in the present, which include concerns over reliability, resource inefficiencies, and infrastructure deficits. These challenges, along with AI’s experimental nature, create a window for policymakers to act," stated the survey, which was tabled in the Lok Sabha by Finance Minister Nirmala Sitharaman.

"The most critical obstacle to large-scale proliferation of AI in the medium term is resource efficiency," it pointed out. For AI to scale effectively, significant reductions in costs and more efficient utilisation of scarce resources is must, the document added.

The survey noted that the prevailing trajectory in AI development prioritises performance over cost-effectiveness, while training AI models are becoming increasingly expensive.

India’s demographic advantage and diverse economic landscape position it uniquely to benefit from AI, the survey highlighted.

"However, achieving these benefits requires significant investments in education and workforce skilling, supported by enabling, insuring, and stewarding institutions. These mechanisms can help workers adapt to changing demands while providing essential safety nets," it said.

By fostering collaboration between policymakers, the private sector, and academia, India can align AI-driven innovation with societal goals, the survey added.

Ensuring inclusivity and sustainability in this transition is "key to maximising benefits while minimising disruptions", it pointed out.

India also requires infrastructural support to scale its advancements in the field of AI, as per the survey. This includes reliable chip supply and data centres to train AI models.

"For AI to be widely adopted across industries, a holistic infrastructure that combines technological resources, human expertise, and organisational readiness is needed. Changes of this magnitude take time to materialise, and even longer to reach the point where the new technology seamlessly synergises with the entire value-addition process," it added.

With robust institutional frameworks and strategic planning, AI can serve "not as a crisis but as a catalyst" for equitable economic transformation, the survey added. This positions India to "thrive" in an increasingly automated world, it further stated.

The Economic Survey, however, noted that there are anxieties about the effects of AI on labour market in India, considering that the country is a services-led economy. It pointed towards an IIM Ahmedabad Survey highlighted how 68% of the surveyed white-collar employees expect their jobs to be "partially or fully automated by AI" within the next five years.

The International Labour Organisation estimates that nearly 75 million jobs globally are at complete risk of automation due to AI.

"The present discourse on AI from international organisations and social science researchers postulates that large scale labour market disruptions due to AI may materialise in the near-term," the Economic Survey said.

Despite the challenges, AI offers "opportunities" as well for the labour market, it said. The survey cited a working paper of the International Monetary Fund and World Bank in which researchers said that firms in India have substantially increased AI skill demand across regions, industries, firms and occupations. "As per their findings, these jobs pay a 13% to 17% salary premium over baseline estimates."

India’s banking sector is also witnessing AI adoption among well-capitalised and larger banks, per a recently published RBI study, the survey added.

With AI adoption accelerating in the private sector, NASSCOM estimates that the Indian AI market will grow at 25-35% compounded annual growth rate by 2027, it noted.

"The integration of AI into India's labour market presents an opportunity to enhance productivity, elevate workforce quality and create employment, provided, systemic challenges are effectively addressed through robust institutional frameworks," the survey further said.