The Core Prediction: A 0.4% Productivity Jump
According to a recent report from Goldman Sachs titled "Gen-AI in India: Jobs Crosswinds, Productivity Tailwinds," the widespread adoption of Generative AI is projected to be a significant economic driver. The investment bank's baseline estimate suggests
that AI could increase India's annual labour productivity growth by approximately 0.4 percentage points over the next decade. Depending on how quickly and capably AI technology evolves to handle more complex tasks, this boost could range from a modest 0.1 percentage points to a substantial 0.8 percentage points annually. This forecast is rooted in AI's ability to automate repetitive work, which would allow employees to shift their focus to higher-value analytical, supervisory, and client-facing roles. The report draws parallels to previous technology cycles in India, like the IT services expansion in the 2000s and the recent rise of digital public infrastructure, which both led to meaningful productivity gains.
Augmentation, Not Just Automation
A key takeaway from the analysis is that Generative AI is more likely to complement Indian workers than replace them. The report estimates that while 8-12% of non-agricultural jobs face a risk of being substituted by AI, a much larger portion—between 42% and 48%—are likely to have their roles augmented by the technology. This means nearly half of the workforce could see AI become a tool that enhances their productivity. The analysis differentiates between automating entire jobs and automating specific tasks. Goldman Sachs estimates that AI could perform between 9% and 17% of the tasks currently done by India's non-agricultural workforce. This suggests that most occupations will become a hybrid of activities that AI can perform and those that still require human creativity, critical thinking, and interpersonal skills. The focus, therefore, is on reallocating labour and changing how work is done, rather than on outright job elimination.
Knowledge Sectors Set to Benefit Most
The impact of AI will not be uniform across the economy. Knowledge-intensive sectors are poised to reap the biggest rewards. Industries like healthcare, education, media, and financial and professional services are highlighted as having the highest potential for AI-driven productivity gains. In these fields, AI can act as a powerful assistant for skilled professionals, helping with tasks like medical diagnostics, data analysis, research, and creating personalised learning plans. Conversely, sectors that rely heavily on physical and manual labour, such as manufacturing, construction, and textiles, are expected to be less directly affected by Generative AI. However, the report also identifies certain service roles, particularly in IT-enabled business process services (BPS), postal, and telecom, that face a higher risk of substitution due to their concentration of repetitive, codifiable tasks.
The Road Ahead: Infrastructure and Investment
Realising this AI-driven potential is not guaranteed. Goldman Sachs cautions that this opportunity hinges on significant investment in critical infrastructure. This includes expanding India's computing power, building more data centres, and ensuring a reliable power supply. The report notes that India currently accounts for only about 1% of global data-centre capacity, highlighting the urgent need for expansion to scale AI adoption nationwide. Furthermore, the successful integration of AI will require a strategic approach to deployment. The report suggests that prioritising AI as a tool to augment workers first—rather than as a direct replacement for labour—could help maximise economic gains while minimising social and labour market disruption. This evolution, rather than revolution, will require a concerted effort from both the public and private sectors to not only build the necessary infrastructure but also to reskill and upskill the workforce for a future where humans and AI work in tandem.
