India less exposed to AI job risks than others, Goldman says

India’s labor force is unlikely to face widespread job losses from artificial intelligence, though some positions in the services sector could be affected, Goldman Sachs Group’s Chief India economist Santanu Sengupta said Friday.

The impact will be limited compared to many other countries, Sengupta said in an interview with Bloomberg Television’s Menaka Doshi. “The main reason is because our workforce is pretty large, and a lot of them are in more mechanical or physical kind of tasks,” he said.

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Construction and retail trade account for about 40% of India’s workforce, and “it’s not really getting impacted by AI currently,” he said. “It’s the services sector which is getting impacted.” The hit could be minimized if AI adoption is sequenced correctly, which may also add 0.4 percentage points to overall productivity over a 10-year horizon, according to Goldman estimates.

If AI is rolled out gradually, India will have “the productivity benefits which will outweigh the potential job losses that you can have over a five-year period,” Sengupta said.

Parts of finance, health care, education and business services will benefit from AI adoption, while “there will be some substitution risks” mainly in postal and telecommunication and IT services, particularly in call-center jobs.

India’s growth resilience has surprised Goldman Sachs. Despite its reliance on imported oil, the economy remains one of the fastest-growing major economies. Inflation rose only slightly last month and remained within the Reserve Bank of India’s 2%-6% tolerance band. Demand has also proved resilient, with record vehicle sales, credit growth at a two-year high and double-digit gains in Goods and Services Tax receipts.

“We thought that the Middle East shock would be a big dent in terms of growth, but we think the economy has been very resilient through the early part of the shock, at least, and it looks like it is behind us.”

The Reserve Bank of India, which earlier this month kept rates unchanged for a fourth straight meeting, could begin raising interest rates from December depending on the pace of core inflation. If underlying price pressures rise more slowly, Sengupta sees increases coming in February and April instead of December and February.

“But we are really looking at a very shallow hiking cycle,” he said. Inflows from foreign-currency deposits and external commercial borrowings should give the central bank time to manage the currency.