Emerging technologies like GenAI set to propel India's economic transformation: EY Report

• India may need considerable investment in technology and innovation to meet its climate-related goals along with sustaining a robust growth trajectory.
• In an increasingly uncertain global environment, India will have to develop its own paradigm of growth and global leadership by optimizing mutual economic benefits.

3 June 2024, New Delhi – As India sets its sight on achieving 'Viksit' status by 2047, the nation's economy stands on the brink of a significant transformation. However, amidst this journey, various global developments are poised to reshape the economic landscape, presenting both challenges and opportunities for India. According to the latest edition of EY Economy Watch, emerging technologies, climate challenges, de-globalization, and de-dollarization are key global trends that must be accounted for by India in its pursuit of becoming a developed nation.

Emerging technologies

The advent of new technologies, notably generative AI (GenAI), has a potential to enhance productivity and output. According to EY report, The AIdea of India, GenAI could potentially boost India's GDP by an estimated US$359-438 billion by FY30.

“India must navigate these technological shifts with suitable policy interventions to ensure a net positive impact on employment while driving overall GDP growth. Striking this balance will require strategic policy support that mitigates job displacement while harnessing the growth potential of emerging technologies,” says Dr DK Srivastava, Chief Policy Advisor, EY India.

Climate challenges and economic resilience

The frequency of natural disasters, intensified by climate change, poses significant economic risks. The Swiss Re Institute (2021) warns that unchecked climate change could shrink the global economy by up to 18% by mid-century. To safeguard against such losses, India must prioritize investments in climate-resilient technology and innovation.

Navigating de-globalization and trade fragmentation

Geopolitical tensions have spurred de-globalization, leading to trade disruptions and fragmentation. India's strategic positioning as a trade connector presents opportunities amidst these challenges. Initiatives such as operating the Iranian Chahabar port and developing new trade routes, like the India-EU corridor via the Gulf would strengthen India's position as a trade connector.

India's lower government indebtedness provides a buffer against external shocks, affording the nation greater fiscal space to implement macro-stabilization efforts during economic downturns. In this context, India is favourably placed as compared to its global peers.

“India can learn from the experiences of existing advanced economies and avoid some of the erstwhile pitfalls in the growth process, such as the Middle-Income Trap and the Dutch Disease. This would require careful policymaking and a commitment to responsible fiscal behaviour so that excessive subsidization or higher government expenditures do not lead to unsustainable commitments,” adds Srivastava.

For more information  - How India can recast its role in the emerging global order (ey.com)

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