AI can bring productivity gains with job risks; impact on India not yet clearly visible: Moody's

New Delhi: Artificial intelligence could boost productivity while displacing jobs in emerging market economies with significant exposure to the IT services and BPO sectors, but the impact is not yet clearly visible in India, Moody's Ratings said on Thursday.

In its Global Emerging Markets outlook 2027 report, Moody's said for most emerging markets, inadequate access to computing capacity, digital infrastructure and skills could increasingly determine their ability to capture AI-related gains.

Moody's expects GDP growth for the largest EMs in 2027 to be largely similar to that in 2026, with some potential upside depending on a potential easing of the Middle East conflict. Moody's has already raised its projections for India's FY'27 GDP growth to 7 per cent, from 6.5 per cent earlier.


It said continued commodity demand will remain a key growth driver for some metal and energy producers, although overall growth will be slow and vary considerably by country.

Resilient consumer spending, where underpinned by supportive policies, and foreign direct investment (FDI), where significant, will also support growth for a number of emerging markets.

"For EMs with significant levels of software or IT and business-process outsourcing exposures, AI could both raise productivity and create displacement risks. But even for India and the Philippines - the potentially most-exposed EM countries - there is no current clear illustration of either trend," Moody's said.

Moody's said most EM sovereigns will stabilise their debt, offsetting the increase in interest rates, through contained spending, revenue raising measures or both.

"The fiscal space for policy responses to further shocks, such as the potential impact of a record El Nino, may however be constrained due to rigid spending structures. Some of the larger EM sovereigns will choose to keep their spending above revenues which, along with higher interest costs, will increase their debt," Moody's said.

Moody's expects some of the largest EMs, such as Brazil, China and India, to increase their public debt through a combination of primary deficit and rising interest payments. For China and India, interest expenses will contribute more than deficits to their growing debt amounts.

Moody's in a separate Global Sovereign Outlook report said sound bank, corporate and household balance sheets and generally effective policy responses to the Middle East energy shock, along with AI investment and gradually normalising oil supply, will support steady global growth. This will also allow governments to maintain stable debt burdens in 2027.

"Risks include higher interest rates, weaker than expected AI investment returns with economic and financial spillovers and renewed geopolitical shocks," it added.