AI may add US$957bn to Indian economy by 2035

A report by Accenture, a global management and technology firm, says that AI may increase India’s annual growth rate of gross value added (GVA) by 1.3 percentage points, lifting the country’s income by 15 per cent in 2035.

December 21, 2017

AI is crucial to a number of initiatives undertaken by the Indian Government that are aimed at improving the economy such as Make in India, Startup India, Digital India and Skill India

AI startups witnessed higher than average growth in India since 2011, and in 2016 ranked third among G20 countries measured by the number of startups operating in the AI space

As per an Accenture survey covering over 88 per cent of Indian businesses, they expect to make moderate-to-extensive investments in one or more AI technologies in the coming three years

Over the recent years, more than 300 AI related startups have come up in India, with an increasing number of these outfits attracting foreign investment and technology

India’s fast-expanding Artificial Intelligence (AI) industry is touted to contribute US$957 billion to the national economy, according to a research report published by Accenture Plc, a global technology and management firm, on December 20th. The report, Rewire for Growth, says that the predicted economic gain will come from improving the mode of work, thus unlocking efficiencies and in turn creating better outcomes for enterprises and the broader society. The research suggests that AI has the potential to increase India’s annual growth rate of gross value added (GVA) by 1.3 percentage points, lifting the country’s income by 15 per cent by 2035. Meanwhile, over the coming 17 years, India’s GVA is estimated to rise to US$7.4 trillion. The report comes amid intensifying activity in India’s AI industry that has attracted the attention of global technology and financial sectors.

AI: Crucial to India’s growth

AI is crucial to a number of initiatives undertaken by the Indian Government that are aimed at improving the economy such as Make in India, Startup India, Digital India and Skill India. It is envisaged that the future of technology represented by the likes of AI, Machine Learning and Robotics, among others, will play an increasingly vital role in tomorrow’s economy and welfare in India. Accordingly, Accenture’s research has found that with the right investments AI can create a flywheel effect liberating people to create long term economic and societal value. The report says that although AI startups have witnessed higher than average growth in India since 2011, and in 2016 ranked third among G20 countries measured by the number of AI startups, the size of funding received continues to be substantially smaller than in the USA and China. This indicates towards a vast scope of further growth in the sector.

Hence, not surprisingly, large businesses are expected to play a vital role in unleashing the economic potential of AI as per a survey by Accenture covering more than 88 per cent of businesses in India. These firms expect to make moderate-to-extensive investments in one or more AI-related technologies over the coming three years. From Indian companies such as retailer Flipkart and technology services firm Infosys Ltd to global technology conglomerates such as Alphabet Inc and Microsoft Corp have invested in India’s AI landscape so far with list staeding increasing. A major reason behind this rising interest is that AI can boost growth and profitability and transform businesses. For instance, India’s manufacturing sector could see a share of profit increase of 39 per cent due to AI-powered systems whose ability to learn, adapt and evolve over time can eliminate faulty infrastructure, while augmenting capacity.

India’s Ministry of Commerce and Industry has set up an AI task force, involving a cross section of stakeholders, to kick-start the use of the technology platform in aiding India’s economic transformation

Rising support for the AI ecosystem

The Indian Government, on its part, has been amending regulations and budget provision to encourage research and development in the creation of an AI ecosystem. This has successfully pushed different stakeholders in India’s AI ecosystem, from educational institutions to financiers, to increase their activity in related innovation. Over the recent years, more than 300 AI related startups have come up in India, with an increasing number of these outfits drawing foreign investment and technology. Among India’s AI startups, 23 per cent are working on providing solutions to multiple industries, 15 per cent are in e-commerce, 12 per cent in healthcare, 11 per cent in education, 10 per cent in financial services, and the rest in fields such as retail and logistics, according to a recent report by Kalaari Capital, a venture capital firm. India is estimated to soon have possibly the fourth largest global cluster of AI enterprises.

To achieve that goal, India’s Ministry of Commerce and Industry has set up an AI task force, involving a cross section of stakeholders, to kick-start the use of the technology platform in aiding India’s economic transformation. As a result, over the last four years, investments into Indian AI ventures, in form of funding as well as acquisitions, increased by almost 10-times. Meanwhile globally, AI spending is forecasted to grow from US$640 million in 2016 to US$37 billion by 2025, according to market research firm Tractica. Going forward, as a bigger chunk of India’s population comes under the coverage of internet, activities in the AI industry will heat up further, drawing even more investor interest. This will be supported by India’s strong population growth, which besides providing the world’s largest youth workforce, supplies diverse dataset as well as human resources to facilitate a range of innovation.