Economic Survey Warns AI Could Displace Jobs in Middle-Lower Income Groups

New Delhi: The Indian Economic Survey, presented in Parliament on Friday, has issued a warning that Artificial Intelligence (AI), while offering the promise of a new technological era, could lead to significant job displacement, particularly within middle and lower-income groups.

The survey, tabled by Union Finance Minister Nirmala Sitharaman ahead of the Union Budget presentation, highlights the risks and opportunities India faces as it embraces AI technology.

Risks of AI Adoption for India’s Workforce

Economic Survey 2024-25 points out that, as noted by Andrew Haldane, former Chief Economist of the Bank of England, historical industrial and technological revolutions have often come with economic hardship, prolonged unemployment for displaced workers, and increased income inequality. The survey warns that the same challenges could arise in India as AI-driven automation expands, particularly affecting those in lower-wage sectors.

India’s economy, which is largely service-oriented, relies heavily on a workforce engaged in low-value-added IT services. These jobs, the survey indicates, are particularly vulnerable to automation, as companies may turn to AI to cut costs and replace human labor.

Strategic Measures to Harness AI’s Potential

To mitigate the negative effects of automation, the Economic Survey stresses the need for a collective societal response. It calls for the creation of new social infrastructure designed to foster innovation and ensure inclusive growth. Specifically, the survey suggests India needs to accelerate the development of robust institutions through collaboration between the government, private sector, and academia.

The survey identifies the necessity of building Social Infrastructure, which includes Enabling Institutions, Insuring Institutions, and Stewarding Institutions. These would help upskill the workforce, transitioning workers from low-skill to medium- and high-skill jobs, where AI can complement rather than replace human labor.

However, the process of establishing these institutions will be time-consuming and require significant intellectual and financial investment.

Challenges in AI Development and Widespread Adoption

The Economic Survey also acknowledges several obstacles AI developers must overcome for widespread adoption. Key challenges include ensuring the practicality and reliability of AI systems, scaling AI infrastructure, and optimizing efficiency without compromising performance. These hurdles will require time and resources to address before AI can be fully integrated into India’s workforce.

The survey also notes that India’s employment challenge extends beyond sheer numbers—it includes improving the overall quality of the workforce. It suggests that when labor and technology are balanced effectively, automation can complement human workers, as evidenced by the 20th-century integration of labor and machinery that led to greater overall employment.

Towards Augmented Intelligence and Inclusive Growth

The future of work, according to the Economic Survey, revolves around “Augmented Intelligence,” a model where human and machine capabilities are combined to enhance productivity and job performance. India’s young, tech-savvy population presents a unique opportunity to integrate AI in ways that boost worker potential.

Despite the challenges, the Economic Survey urges policymakers to balance innovation with consideration of the societal costs. The report stresses the importance of responsible AI adoption in the corporate sector, while also acknowledging that AI is still in its early stages in India. This gives the country time to address potential challenges, strengthen its institutional frameworks, and mobilize a nationwide response.

The survey concludes that a collaborative effort between the government, private sector, and academic institutions will be essential to navigating the AI revolution successfully.