Gen AI To Boost India's GDP By $359 Billion By FY30: RBI Deputy Governor

The Deputy Governor highlighted that complementary policies will be crucial in unlocking new growth potential by harnessing the productivity gains driven by digital technologies

Michael Debabrata Patra, Deputy Governor of the Reserve Bank of India (RBI), said on Wednesday that forecasts suggest generative artificial intelligence (AI) could contribute between $359 billion and $438 billion to India's GDP by 2029-30.

He also highlighted a notable increase in AI adoption among Indian firms, with the percentage of companies using AI in production processes rising from 8 per cent in 2023 to 25 per cent in 2024.

“India is uniquely positioned to unlock new growth avenues and optimise existing ones with its digital public infrastructure (DPI), a vibrant information technology (IT) sector and a burgeoning youth population, including one of the largest AI talent bases. Forecasts suggest that Generative AI will contribute $359-438 billion to India’s GDP by 2029-30. Indian firms’ integration of AI into production processes has increased from 8 per cent in 2023 to 25 per cent in 2024,” Patra said while speaking at the DEPR Conference on ‘Digital Technology, Productivity and Economic Growth in India’ in Jaipur.

He noted that micro-level data from surveys of Indian banks reveals widespread digital adoption. While all banks have implemented mobile and internet banking, 75 per cent now offer online account opening, digital KYC, and digitally enabled doorstep banking services.

Furthermore, 60 per cent of banks provide digital lending, 50 per cent offer payment aggregator services, 41 per cent use chatbots, 24 per cent have adopted open banking, and 10 per cent have integrated Internet of Things (IoT) technology.

“Private sector banks are leading this technology adoption,” Patra added.

The Deputy Governor emphasised that complementary policies will be crucial in unlocking new growth potential by harnessing the productivity gains driven by digital technologies.

Patra outlined several key policy priorities, including promoting competition to reduce market concentration and facilitating efficient resource reallocation. He also noted that generative AI is projected to add $7-10 trillion to global GDP over the next three years. Large language models alone are expected to boost worker productivity by 8 to 36 per cent.

Patra further explained that the KLEMS framework (Capital, Labour, Energy, Materials, and Service) is valuable for capturing the impact of digitalisation. It helps measure contributions to labour quality, capital quality, value-added, and total factor productivity. However, this framework requires disaggregating capital and labour into components such as ICT capital, human capital, and complementary investments that account for digital assets as production inputs. This disaggregation can be challenging, mainly due to gaps in comprehensive data.