Economic Survey 2025 has an entire chapter on AI; word finds more mention than economy, finance

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Artificial Intelligence (AI) and its second-order impact on jobs and livelihood took centre-stage in the Economic Survey 2025, with the document dedicating over twenty pages to it ahead of the Union Budget on February 1.

Further, the words “Artificial Intelligence” and “AI” are mentioned in the 436-page document, more than the words “Economy”, “Economic Survey”, and “GDP”, in the survey tabled on January 31.

While "Artificial Intelligence" and "AI" are mentioned about 260 times in the document, economy and finance are mentioned 199 and 45 times, respectively.

The survey predicts a future where AI-driven automation could surpass human capabilities in critical decision-making areas such as healthcare, criminal justice, education, and financial services. This would subsequently lead to the displacement of India’s workforce, however, it also contradicts and caveats that more jobs might be created.

Another important concern raised in the report is the risk of economic displacement. It warns that the rapid integration of AI could exacerbate existing inequalities if its benefits remain concentrated among a few major corporations.

Impact on Workforce

The Survey says that India’s services-led economy makes it particularly vulnerable to AI-induced disruptions. The banking sector is already seeing mass AI adoption, with cash-rich enterprises investing heavily in AI-related analytics and automation processes.

Nonetheless, while certain job roles may become redundant, new employment avenues could emerge in AI development and implementation.

India’s AI market is expected to grow at a compound annual growth rate (CAGR) of 25-35 percent by 2027, according to industry body NASSCOM.

Also, read: Economic Survey warns of AI triggering widespread labour displacement

Tech-specific skills going obsolete?

The document says technology-specific skills run the risk of becoming obsolete very soon, especially in today’s world where the requirements shift rapidly.

Developments in the field of AI create tools capable of automating basic knowledge creation and processing which may well be the new normal. These include critical thinking, higher degrees of creativity, and the capacity for more specialised knowledge.

Also, read: Economic Survey 2025 says tech-specific skills run the risk of becoming obsolete very soon

“Thus, India's employment challenge is not just about numbers but also about raising the overall ‘quality’ of the workforce,” the Economic Survey, which comes a day ahead of the Budget, said. Quality, in this case, does not just mean imparting knowledge through a step-by-step guide to leveraging AI, or providing very specific training related to ‘AI-oriented jobs.”

The survey called for improvement in the quality of the workforce, saying the focus should be on foundational skills, soft skills and core competencies which are valuable across industries and roles.

The silver lining is that due to the research and development (R&D) nature of AI, India has the opportunity to catch up with, if not get ahead of the curve, and prepare its workforce.

IT jobs at risk

As a major services-driven economy, the Indian information technology (IT) workforce employed in low-value-added services is the most susceptible to automation.

In their bid to cut costs, companies may substitute labour for technology. The effects are already visible in the case of tech firms in India and the business process outsourcing (BPO) sector in the Philippines.

A fall in consumption, resulting from the displacement of the workforce, is bound to have macroeconomic implications.

“If the worst-case projections materialise, this could have the potential to set the country’s economic growth trajectory off course,” the survey said.

Describing policymaking as “a wicked problem”, the survey called for overestimating the uncertainties and being overprepared rather than underestimating the effects and managing the fallout.

Taxing AI-driven profits?

Moreover, the survey also advocated the corporate sector to display a high degree of social responsibility with respect to AI.

Although the impact of AI on labour will be felt across the world, the problem will be magnified in India, given its size and relatively low per capita income.

"If companies do not optimise the introduction of AI over a longer horizon and do not handle it with sensitivity, the demand for policy intervention and the demand on fiscal resources to compensate will be irresistible" the Economic Survey read.

It will leave everyone worse off, as the state will have to resort to taxation of profits generated from the replacement of labour with technology to mobilise these resources, ultimately harming the country's growth potential.

For context, some IT companies like Cognizant have previously said that productivity benefits from AI and automation are helping the company work with fewer employees.

These comments come amid growing concerns of job losses due to the increased adoption of AI across a range of sectors.

Curb the resource-hungry AI?

The survey mentions that democratisation of AI risks jeopardising critical priorities like energy, water, housing, and even food security, and it is time to scale down their resource consumption.

“Without ground-breaking innovations and strategies to make AI scaling economically viable —both financially and in terms of resource consumption — efforts to democratise AI will jeopardise critical global priorities such as energy and water security, and even housing or food security,” the survey said.

Also, read: Scale down AI resource consumption, else risk jeopardising energy, water security

The document added that the construction of sprawling data centres risks displacing essential land use, further exacerbating these challenges.

The survey underscored India's significant growth and expansion of data centre infrastructure amid rising demand for digital services. The domestic data centre market is poised to grow from $4.5 billion in 2023 to $11.6 billion by 2032, at a CAGR of 10.98%, as per one estimate.

The survey said the imperatives for AI developers are clear - scaling down resource consumption while simultaneously boosting performance is not just a technical hurdle, but the defining bottleneck that will shape the future of AI.

Also, read: Resource inefficiency biggest obstacle for large-scale AI adoption in medium term: Eco Survey

Preparing for the “war”

In order to equip its workforce, India needs to prioritise education and skill development in a world that is moving fast to take advantage of rapid AI adoption.

"By capitalising on the global infancy of AI, India has the opportunity to prepare its labour force for a future defined by collaboration between human and machine intelligence. The survey in its previous release had highlighted that economy needs to create 7.9 million jobs between now and 2030 to accommodate the growing workforce," the survey document read.

India’s job trajectory has improved despite growth not performing up to the mark, as per results of government surveys.

Data from the periodic labour force survey shows that India’s urban unemployment rate declined further to 6.4 percent in the second quarter of the current fiscal compared with 6.6 percent in the previous quarter.

This decline was accompanied by a rise in female labour force participation and increased proportion of people employed in regular salaried work.

Worry on Black-Box

Indian banks are aggressively integrating AI across operations, from credit underwriting to fraud detection, as they embrace the digital era. However, as AI transforms banking, concerns over transparency, accountability, and cyber threats are on the rise.

AI and large language models (LLMs) have made customer service better through interactive
chatbots and personalised experiences, while blockchain offers secure, transparent,
and efficient transactions.

While AI promises efficiency, its “black-box” nature raises challenges.

"The black-box nature of AI systems can make it difficult to assess the system's reliability or
contest its decisions. This lack of transparency can lead to trust concerns and challenges
in validating the fairness and accuracy of AI decisions, making it challenging to audit or
interpret the algorithms that drive the decisions,' it said.

Also, read: AI makes banks efficient but banking a bit risky, says Economic Survey

In AI, a "black box" means the system is not transparent with inputs and operations not visible to the user or another interested party.

To counter this, banking regulator – Reserve Bank of India (RBI)- has been actively engaging with banks and experts to establish oversight mechanisms.

It has launched a regulatory sandbox for testing AI-driven innovations and announced the formation of a Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI).

Also, read: Economic Survey 2025 advocates for 'responsible AI adoption' to safeguard jobs