Generative AI to potentially add a cumulative US$1.2 - 1.5 trillion to India’s GDP by FY2029-30: EY report

• 75% of C-suite survey respondents express a low to moderate level of readiness to harness the benefits of Generative AI.
• Recommends regulatory actions to foster innovation.

Bangalore, 17 December 2023: Generative AI (Gen AI) has the potential to add a cumulative US$1.2-1.5 trillion to India’s Gross Domestic Product over the next seven years, as outlined in the EY India report, titled The AIdea of India: Generative AI’s potential to accelerate India’s digital transformation.

The report forecasts that by fully capitalizing Gen AI technology and its applications across sectors, India can potentially add US$ 359-438 billion in FY2029-30 alone, reflecting a 5.9% to 7.2% increase over and above baseline GDP. Approximately 69% of the overall impact is expected to be derived from sectors such as business services (including IT, legal, consulting, outsourcing, rental of machinery and equipment, and others), financial services, education, retail, and healthcare. The expected impact encompasses improvements in employee productivity, enhanced operational efficiency, and personalized customer engagement.

The EY report offers insights into the industry's preparedness and challenges in embracing Gen AI.  The findings arise from a comprehensive survey that engaged over 200 C-suite participants, revealing that 60% of organizations acknowledge the significant influence of Gen AI on their businesses. However, 75% of them express a low to moderate level of readiness to harness the benefits of Gen AI. The two primary challenges faced by organizations currently are skills-gap (52%) and the availability of unclear use cases (47%), while only 36% organizations see data privacy as the risk of Gen AI.

Moreover, the development of a Gen AI strategy is now deemed essential, with 75% of organizations identifying customer engagement as the most crucial aspect influenced by Gen AI. While 73% of organizations prefer to collaborate with external tech providers for its implementation.

Considering Gen AI’s immense potential to act as an economic growth catalyst, Governments worldwide are actively pursuing measures to promote and regulate AI. Implementing measures like enabling access to training data and marketplaces, deployment of Gen AI systems as Public Goods, securing critical digital infrastructure (through roll-out of 5G, data centers, access to specialized chips and AI specific compute infrastructure), and access to talent and public funding of R&D will help foster Gen AI innovation. 

At the same time, clarity on regulatory framework, establishing regulatory sandboxes, watermarking Gen AI content, and setting standards for accountability and liability to build trust in the AI systems will be critical. 

Mahesh Makhija, Technology Consulting Leader, EY India, said, “Organizations are swiftly adopting to AI-first approach to digital transformation, aiming to enhance customer engagement, increase productivity and achieve greater agility in delivering digital capabilities using innovative foundation models and AI-First solutions. Although in early stages, there is a tremendous sense of optimism in AI and to realize its full potential, India must significantly elevate its efforts in terms of increased government role in development and deployment. Moreover, providing critical compute ecosystem for continuous innovation and growth will be vital for India to stay competitive in this evolving landscape.”

Enabling ‘AI for all’

Developing Gen AI systems as a “Public Good” in line with the National Strategy for Artificial Intelligence (2018), which emphasizes an inclusive “AI for ALL” lens will be critical to realise its impact across sectors, including education, healthcare, agriculture, smart cities, and more. Providing access to data and marketplaces, securing digital infrastructure, and facilitating talent access and public funding for R&D can enhance Gen AI innovation in India. Similar to UAE and EU, developing open-source ecosystem for basic algorithms and training datasets can help Indian entities and start-ups develop their own Gen AI products and fast-track indigenous innovation.

EY experts stipulate that while Gen AI’s positive impact is anticipated across industries, its level of influence in each segment will depend on factors like feasibility, adoption rates, and an industry segment’s contribution to India’s economic activity.

Note to the editor:

Prediction methodology

To evaluate Gen AI's economic impact on India, EY has developed a macro framework utilizing sectoral shares and input and output ratios. This is then combined with insights drawn from EY’s sector leaders based on their expertise and client interactions regarding Gen AI’s efficiency effects in terms of cost reduction and output expansion over the period from FY23-24 to FY29-30. A bottom-up approach has been used wherein the additional gross value added (GVA) in each sector on account of Gen AI adoption is estimated. This is then aggregated to arrive at the economy wide additional GVA. Finally, by adding suitably estimated net indirect taxes (indirect taxes minus subsidies), we arrive at the additional GDP attributable to Gen AI.  

The assessment of the economic impact of Gen AI is range bound instead of a point estimate. In an optimistic scenario (broad- based adoption), the impact may be closer to the upper end of the range. But if the adoption rates are less than envisaged, the lower limit may materialize.

About the survey

The survey conducted by EY cast a wide net, encompassing a diverse array of industries and a rich tapestry of professionals occupying various roles. The survey was designed to reflect the breadth of Indian business sectors. It canvassed ~200 C-suite executives across India. They represent diverse sectors, including Technology; Media and Entertainment; Financial Services; Government; Health, Pharma and Life sciences; Retail; and Manufacturing. These diverse sectors ensure that the survey findings encapsulate insights from decision-makers, strategists, compliance officers, and specialists in various domains.

About EY

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