MUMBAI: India may have a little more room to breathe in the AI race. While artificial intelligence threatens to automate parts of the global workforce, Goldman Sachs believes India’s large pool of workers in physical and mechanical occupations could shield the country from widespread job displacement, at least for now.
Speaking to Bloomberg Television, Santanu Sengupta, chief India economist at Goldman Sachs, said the employment impact of AI is likely to be concentrated in parts of India’s services economy rather than spread evenly across the labour market.
A key reason is where Indians work. Construction and retail trade together account for about 40 per cent of employment, according to the analysis cited by Goldman Sachs. These occupations have so far faced relatively limited direct disruption from AI compared with software-heavy roles.
The pressure is therefore expected to be more visible in services, particularly jobs where software can automate or augment existing tasks. Goldman Sachs identified postal and telecommunications services and IT, especially call-centre roles, as areas where the risk of substitution could emerge.
But AI’s story is not simply one of jobs disappearing. Its other side is productivity. Goldman Sachs expects adoption of the technology to generate gains across sectors such as finance, healthcare, education and business services, with the eventual employment impact depending partly on how quickly companies introduce AI.
Sengupta said a phased rollout could allow productivity gains to outweigh potential job losses over a five-year period. Goldman Sachs estimates that appropriately sequenced AI adoption could add around 0.4 percentage points to India’s productivity over 10 years.
The assessment comes as the investment bank takes a more positive view of India’s ability to absorb recent economic pressures. Sengupta said the economy had performed better than expected despite its reliance on imported oil and the impact of the Middle East crisis.
Domestic demand has remained supportive, with vehicle sales, credit growth and Goods and Services Tax collections showing strength. GST collections have continued to grow at double-digit rates, while inflation remains within the Reserve Bank of India’s 2-6 per cent tolerance range.
Monetary policy could nevertheless become tighter. Goldman Sachs expects the Reserve Bank of India could begin raising interest rates from December, depending on the trajectory of core inflation. If underlying price pressures remain more contained, the first hike could instead come in February, followed by another in April.
Sengupta expects the resulting tightening cycle to be shallow, with foreign-currency deposits and external commercial borrowings giving the central bank additional room to manage pressure on the rupee.
For India’s jobs market, the bigger test will be whether AI eventually moves beyond the keyboard and into occupations built around physical work. For now, the country’s employment mix may be giving it a useful buffer against the first wave of AI-led disruption.
