Generative AI to add $359 bn-$438 bn to India's GDP by FY30: RBI DG Patra

Private sector banks are leading technology adoption, said Michael Debabrata Patra, deputy governor, Reserve Bank of India

Forecasts indicate that generative artificial intelligence (AI) could add between $359 billion and $438 billion to India’s GDP by 2029-30, said Michael Debabrata Patra, Deputy Governor of Reserve Bank of India (RBI) on Wednesday.

 

The adoption of AI in production processes by Indian firms has risen from 8 per cent in 2023 to 25 per cent in 2024.

 

“India is uniquely positioned to unlock new growth avenues and optimise existing ones with its digital public infrastructure (DPI), a vibrant information technology (IT) sector and a burgeoning youth population, including one of the largest AI talent bases. Forecasts suggest that Generative AI will contribute $359-438 billion to India’s GDP by 2029-30. Indian firms’ integration of AI into production processes has increased from 8 per cent in 2023 to 25 per cent in 2024,” Patra said at

   

DEPR Conference on ‘Digital Technology, Productivity and Economic Growth in India’ in Jaipur.

 

He said micro-level evidence from surveys of Indian banks shows that while all of them have implemented mobile and internet banking, 75 per cent offer online account opening, digital KYC, and digitally enabled doorstep banking.

 

Additionally, 60 per cent provide digital lending, 50 per cent offer payment aggregator services, 41 per cent use chatbots, 24 per cent have adopted open banking, and 10 per cent have integrated Internet of Things (IoT) technology.

 

“Private sector banks are leading this technology adoption,” Patra said.

 

The deputy governor emphasised that complementary policies would play a key role in unlocking new growth energies by reaping the productivity gains offered by digital technologies.

 

Some of the policy priorities, as highlighted by Patra, are promoting competition to reduce market concentration, and efficient resource reallocation, among others.

 

Patra also said that generative AI is projected to boost global GDP by $7-10 trillion over the next three years. Large language models alone are expected to enhance worker productivity by 8 to 36 per cent.

 

Productivity patterns are increasingly being shaped by the expanding role of digital services and intangible capital, driven by rising business investment in digital technologies.

 

Prices of digital assets, including information and communication technology (ICT), continue to decline, enabling businesses to operate more efficiently and deliver competitive products and services.

 

Technological innovation boosts productivity by enhancing financial intermediation, expanding the variety of financial products and services, improving service delivery efficiency, and leveraging digital tools to mitigate risks. Additionally, digitalisation has the potential to facilitate cross-border financial flows, reducing the cost and increasing the speed and transparency of remittances.

 

He further said that the KLEMS (Capital, Labour, Energy, Materials and Service) framework is valuable for capturing digitalisation’s impact by measuring its contributions to labour quality, capital quality, value added, and total factor productivity. This framework requires breaking down aggregated capital and labour into ICT capital, human capital, and complementary investments that incorporate digital assets as production inputs. However, this disaggregation can be challenging, particularly due to gaps in comprehensive data.