The Global Growth Puzzle
Major economic bodies are painting a picture of a global economy losing steam. The International Monetary Fund (IMF) projects global growth to be a modest 3.0 percent in 2026. Similarly, the World Bank has also downgraded its global growth forecast for 2026,
citing a challenging outlook. This slowdown comes despite a technology-driven investment boom, a powerful force that institutions like the IMF note is running counter to other global headwinds. The data reveals an uneven landscape: some economies integrated into the global tech value chain are lifted by AI-driven demand, while many others, particularly energy importers and low-income countries, face a tougher road. This divergence sets the stage for a critical question: why isn't the AI boom lifting all boats?
AI: The Winner-Takes-Most Market
The promise of AI is monumental, with the potential to significantly boost productivity and create new efficiencies. However, realizing this potential requires massive upfront investment. The development and deployment of cutting-edge AI are overwhelmingly concentrated in a handful of tech giants. Companies like Microsoft, Google (Alphabet), Nvidia, and Amazon are pouring billions into data centres, proprietary models like Gemini, and the specialised chips required to power them. This AI buildout is so dependent on specific inputs that nearly 90 percent of the relevant high-tech equipment is imported from a few concentrated suppliers in East Asia. This concentration creates enormous barriers to entry. Smaller companies and developing nations lack the capital and infrastructure to compete at the foundational level, leading to a market where the rewards flow to a select few.
The Productivity Paradox 2.0
Historically, transformative technologies eventually lead to broad productivity gains across the economy. With AI, however, we are witnessing what might be termed a new productivity paradox. While some studies show significant productivity boosts for specific workers, particularly knowledge workers, these gains are not yet translating into a significant lift in economy-wide statistics. One reason is the uneven rate of adoption. While a majority of organisations report using AI, many are in the early stages and see only low-level cost savings or revenue gains. The benefits are not being harvested passively; they require reinvestment in infrastructure and upskilling. The result is a gap between the potential of AI and its current, tangible impact on the broader economy, which remains limited for most organisations.
A Widening Economic Chasm
The concentrated nature of AI investment is not just an issue for corporate competition; it has profound implications for inequality. The rewards are flowing to a narrow group: the 'hyperscaler' tech companies, their shareholders, and a class of highly-skilled workers who can leverage AI to augment their work. This dynamic threatens to worsen income disparities both within and between countries. While some studies suggest AI could narrow performance gaps within specific professions, the broader trend could see a greater share of income shifting from labour to capital. As AI automates more tasks, nations and workers unable to participate at the high-skill, high-investment end of the spectrum risk being left further behind, deepening the global divide.
Implications for India
For an economy like India, a major player in the global tech services industry, this trend presents both a challenge and an opportunity. South Asia is expected to remain a key driver of global growth. However, the concentration of power in a few US-based tech giants could disrupt traditional IT service models. The challenge will be to move up the value chain beyond providing backend support for AI systems developed elsewhere. This requires fostering domestic innovation, investing in high-end skills, and creating an ecosystem where Indian startups can create and own intellectual property. The risk is that if the country primarily serves as a low-cost implementation partner for foreign-owned AI platforms, the wealth generated will continue to flow outwards, limiting the broad-based economic benefits for India's vast population.
