Increase in AI intensity by 1 unit can lead to 2.5 pc increase in GDP: ICRIER

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July 27, 2020 7:00 PM

Niti Aayog CEO Amitabh Kant, while releasing the report, said India is in the midst of a once-in-a-generation disruption driven by AI.

Investment of Rs 7,000 crore, approved by the Ministry of Finance towards AI program, could increase AI investments at rates higher than the business-as-usual-rates.

A unit increase in artificial intelligence (AI) intensity, measured as the ratio of AI investments to total sales, can result in a 2.5 per cent increase in India’s GDP in the immediate term, according to a report by economic think tank ICRIER. The economic effects of AI also include indirect effects on productivity, the Indian Council for Research on International Economic Relations (ICRIER) said in the report titled ‘Implications of AI on the Indian Economy’.

“The results find a positive and significant relation between AI using firms and TFP (total factor productivity) growth. The estimates suggest that a unit increase in AI intensity, measured as the ratio of AI investments to total sales, can result in a 2.5 per cent increase in India’s GDP in the immediate term,” it said. It also pointed out that ‘business-as-usual growth’ in AI investments is unlikely to increase current levels of AI intensity. “In order to trigger a positive growth shock, AI intensities should be sharply increased,” it said.

Investment of Rs 7,000 crore, approved by the Ministry of Finance towards AI program, could increase AI investments at rates higher than the business-as-usual-rates, it noted. “This increase in investment will lead to an approximate 1.3 times increase in AI intensity, translating into spillover benefits of 3.2 per cent of GDP,” the report said.

Niti Aayog CEO Amitabh Kant, while releasing the report, said India is in the midst of a once-in-a-generation disruption driven by AI. “Artificial intelligence has become a strategic lever for economic growth across nations and will continue to be one of the most crucial technologies of the future,” he said.

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