Indian companies using AI can help boost GDP: Report

A unit increase in artificial intelligence (AI) intensity by Indian firms can result in a 2.5% increase in India’s GDP in the immediate term, claims report launched by National Association of Software and Services Companies (NASSCOM) in collaboration with Google and think tank ICRIER. The research findings are from a study titled “Implications of AI on the Indian Economy.”
AI intensity is measured as the ratio of AI to total sales of the firm.In the absence of a direct measure of AI at the firm level, the model uses investments in software, databases and computer machinery as a proxy for AI. The results of the model find a positive and significant relation between AI using firms and growth in total factor productivity (TFP), said the organisations.
However, as per the study, the current rate of growth in AI investments is unlikely to increase the levels of AI intensity adequately. In order to trigger a positive growth shock, AI intensities should be sharply increased. For example, the investment of Rs 7,000 crore approved by the Ministry of Finance towards an Artificial Intelligence program could increase AI investments at rates higher than the business as usual rates. This increase in investment will lead to approximately 1.3 times increase in AI intensity, translating into spillover benefits of 3.2% increase in India’s GDP, claims the study.
According to the organisations, the report’s econometric estimation provides adequate evidence for policy measures required to support AI’s wider adoption in India, including (1) identifying a nodal agency for the development and diffusion of AI, (2) building collaborative frameworks for engagement between governments, Industry and academia; (3) building an all-encompassing data strategy for India; (4) addressing India’s skill gap in AI and (5) promoting the development of AI safety standards.