Goldman Sachs: AI Unlikely To Cause Widespread Job Losses In India

Goldman Sachs Chief India Economist Santanu Sengupta has stated that India is unlikely to experience widespread job losses due to artificial intelligence.

According to Sengupta, the impact of AI on India's workforce is expected to be relatively limited because a significant share of workers are employed in physical or mechanical occupations.

Construction and retail trade together account for around 40% of the workforce and are currently less exposed to AI-driven substitution.

However, the services sector is likely to see greater disruption, with parts of finance, healthcare, education, and business services potentially benefiting from AI adoption.

On the other hand, substitution risks are more prominent in postal and telecommunications services and IT, particularly call-centre jobs.

A carefully sequenced rollout of AI could increase overall productivity by around 0.4 percentage points over a 10-year period, according to Goldman Sachs estimates.

The productivity gains from gradual adoption could outweigh potential job losses over a five-year horizon.

Goldman Sachs has been surprised by the resilience of India's economy, which continues to rank among the fastest-growing major economies despite its dependence on imported oil.

Recent indicators, including strong vehicle sales, credit growth reaching a two-year high, and double-digit growth in Goods and Services Tax collections, point to robust domestic demand.

The economy has weathered the initial impact of the Middle East shock better than expected.

On monetary policy, the Reserve Bank of India could potentially begin raising interest rates from December if core inflation accelerates.

If underlying price pressures remain contained, rate increases could instead begin in February and April.

Sengupta expects any tightening cycle to be shallow, with foreign-currency deposits and external commercial borrowings providing the RBI some flexibility in managing the rupee.

In conclusion, while AI may not cause widespread job losses in India, certain sectors will still face disruption, and the country's economy is expected to continue growing despite global challenges.