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India’s GDP boosts to 2.5% by AI : Report by ICRIER, Google & NASSCOM

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AI adoption may lead to hike in India's GDPAccording to The report titled, ’Implications of AI on the Indian Economy’ by National Association of Software and Services Companies (NASSCOM) along with the Indian Council for Research on International Economic Relations (ICRIER) and Google, a unit increase(measured as the ratio of AI to total sales) in Artificial Intelligence(AI) intensity can result in a 2.5% increase in India’s Gross Domestic Product(GDP) in the immediate term.

Key Info

  • The report results find a positive and significant relation between AI using firms and TFP (total factor productivity) growth.
  • The business as usual growth in AI investments is unlikely to increase current levels of AI intensity
  • To trigger a positive growth shock, AI intensities must be sharply increased.

HIghlights of the report

Investment of Rs 7,000 crore

i.The report noted that the Investment of Rs 7,000 crore, announced in the Union Budget towards AI program will increase AI investments at rates higher than the business-as-usual-rates.

ii.The increase in investment will improve the AI intensity by approximately 1.3 times, resulting in benefits of $85.77 billion or increase in 3.2% of the GDP.

Recommended policy measures

The  following are the recommended policy measures of the report to support AI’s wider adoption in India:

  • Identify a nodal agency for the development and diffusion of AI.
  • Build collaborative frameworks for engagement between governments, industry and academia.
  • Build an all-encompassing data strategy for India, addressing India’s skill gap in AI and promoting the development of AI safety standards among others

Key Facts of the report

i.As per estimates, Indian AI market for start-ups attracted USD 762.5 million in 2019. Even Though companies recognise the benefits and potential of AI, the cost and the doubts on return on investments in AI are acting as a barrier.

ii.Once AI goes mainstream its positive impact would become more noticeable in GDP

iii.The report recognises the role of the government  to create institutions and provide public goods that enable an AI ecosystem. 

Note-The report has used investments in software, databases and computer machinery as a proxy for AI.

Recent Related News:

i.According to the RBI Governor Shaktikanta Das, India’s gross domestic product (GDP) growth will be in negative territory in 2020-21 as the outbreak of coronavirus has disrupted economic activities. He also stated that the inflation outlook is “highly uncertain”.

ii.The Federation of Indian Export Organisations(FIEO), apex body of exporters informed that Indian exports are expected to fall by 20% in the current fiscal, in value terms it will be around USD 50 to 60 billion & also imports due to COVID-19 pandemic.

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