To leverage AI, India needs a robust regulatory mechanism

It is important to look at AI's impact on the economy.

(Sanghnomics is a weekly column that tracks down and demystifies the economic world view of Rashtriya Swayamsevak Sangh (RSS) and organisations inspired by its ideology.)

In wake of the recent developments in the field of Artificial Intelligence, Union Information and Technology minister Ashwini Vaishnaw recently  stated that India is developing its own generative AI model, similar to ChatGPT and DeepSeek. The Indian model is expected to be launched in 2025.

Even as the competition hots up in the field of AI, it is important to look at its impact on the economy especially in context of ‘job losses’. Economic Survey of India 2024-25 has taken a detailed look at the possible scenarios and flagged some of them as potentially disturbing for Indian economy.

The Economic Survey, released on 31 January 2025, set the context for analysing the economic impact of AI, stating that concerns about Artificial Intelligence (AI) disrupting labour markets have grown significantly as advancements in the field have accelerated over the past four years. The increasing sophistication of modern AI models marks a fundamental shift, indicating that in the near future, ‘intelligent machines’ could take over tasks currently performed by humans. The founder of OpenAI, a leading AI research and deployment company, recently mentioned in a blog post that they anticipate having office-ready ‘AI workers’ by the end of 2025.

According to the International Monetary Fund(IMF), AI poses risks of job displacement, particularly for emerging markets and developing economies, which are not well-placed to leverage the technology compared to advanced economies.

The International Labour Organisation estimates that nearly 75 million jobs globally are at complete risk of automation due to AI. Industry experts have already indicated that AI models could dramatically disrupt the labour market, potentially replacing routine jobs in some sectors. Goldman Sachs economists have estimated that nearly 300 million full-time jobs remain exposed to AI-driven automation.

According to the Economic Survey, “Anxieties about the effects of AI remain high in India as well, considering our country is a services-led economy. Among white-collar workers, an IIM Ahmedabad Survey highlights how 68 per cent of the surveyed employees expect their jobs to be partially or fully automated by AI within the next five years. Forty per cent of the employees believe AI will make their skills redundant.”

A recent RBI study indicates that India's banking sector is also experiencing AI adoption, particularly among well-capitalised and larger banks. As the private sector and market continue to embrace AI at an increasing rate, NASSCOM projects that the Indian AI market will expand at a compound annual growth rate (CAGR) of 25 to 35 per cent by 2027.

The Economic Survey rightly highlights the potential challenges posed by AI, mentioning that protracted labour displacement (due to AI) is something that a labour-surplus country like India cannot afford. India is already facing a challenging situation, as last year the Economic Survey outlined that there is a need to create an average of 7.85 million jobs annually in the non-farm sector by 2030 to cater to the rising workforce.

In addition, India is a predominantly services-driven economy, with a significant share of the IT workforce employed in low-value-added services. Such jobs could be usurped by AI-driven automation, as technology would be a cheaper option than labour. This could lead to mass unemployment, which in turn would cause a fall in household income and purchasing power, delivering a major blow to consumption. As India is primarily a consumption-driven economy, a reduction in consumption could severely affect economic growth.

If the worst-case projections materialise, this could have the potential to derail the country’s economic growth trajectory, according to the latest Economic Survey.

Regulatory Mechanism: A Challenge

The first and foremost requirement for India is to establish a robust regulatory mechanism for AI. However, it is still evolving. There is no explicit law that deals with AI, though there are some broad frameworks, and work is underway to prepare some draft rules. A look at the regulatory landscape also indicates how complex this task is, as multiple agencies and ministries are involved.

In 2018, the NITI Aayog released the National Strategy for Artificial Intelligence #AIForAll  which had  AI research and development guidelines for  education, healthcare,  infrastructure agriculture, smart mobility amongst others

In February 2021, the NITI Aayog released Part 1 - Principles for Responsible AI.  This was an approach paper which explored the various ethical considerations of deploying AI solutions in India. It was followed by release of  Part 2 - Operationalizing Principles for Responsible AI in August 2021. This provided a roadmap for all stakeholders to deal with regulatory interventions as well as ethical challenges A new privacy law, the Digital Personal Data Protection Act  2023 also dealt with some of the privacy concerns in the context of AI platforms.

India is also a member of the Global Partnership on Artificial Intelligence (GPAI). The 2023 GPAI Summit was held in New Delhi, where the future roadmap for the evolution of responsible AI was discussed.

One of the key players working on AI policies for India is the Ministry of Electronics and Information Technology. It has created four committees on AI that have submitted their reports. These reports address legal, security, safety, and ethical aspects of AI, among other issues.

The Bureau of Indian Standards (BIS), under the Ministry of Consumer Affairs has also come out with a document that provides “guidance for AI applications based on a common framework.”

It is clear that India is moving in the right direction, but there is still a long way to go, and the biggest challenge is how to ensure that the regulatory framework matches the pace of evolution of AI.

Earlier Sanghnomics columns can be read here.