The impact of AI on Indian jobs is a distraction we can do without: the process of reforming the economy must be fixed
AI seems to be in every discussion these days, whatever it is about: privacy, surveillance, consumer rights, health, education, climate change, jobs, incomes. On one hand, there is optimism that AI will improve the world in ways that human intelligence has not been able to. On the other is the fear that we don’t know how this artificial, non-human, intelligence will change the world.
There are two responses to the uncertainty about whether the good side of AI will brighten our lives, or whether its’ dark side will make us less secure. One response is to predict the future outcomes for a world with more AI and design policies accordingly. The other is to regulate AI beforehand, even before we agree about what outcomes it will produce so that we can prevent its bad side from destroying us and get more of the good.
Accurate predictions of the future are impossible. “The only thing you cannot predict is the future”, someone said. I asked ChatGPT who did. ChatGPT said many people have said it through history and one cannot attribute this eternal wisdom to anyone. The question is, why is the future unpredictable? There are two reasons.
One is that multiple forces interacting with each other, in non-linear ways, change the state of complex systems and produce outcomes that will not be visible until the system has changed. Social, economic, environmental, and political forces will be impacted by any transformative technology, and they will, in turn, react to the technology and change its course.
Ten years ago, the hype was “Industry 4.0”, a theme pushed by the WEF and other lobbies. An industry of consultants grew advising governments and corporations how to implement Industry 4.0. They made predictions of how jobs will be affected and what new skills will be required. There were wide differences in their predictions about what new skills will be required and how employment will be affected. A report prepared by CII in 2016, which I guided, titled, “Future of Jobs in India: Enterprises and Livelihoods (A Systems View and Scenarios)”, noted the wide variation of their estimates. For example, forecasts in 2016 by reputable consultancies, of jobs in the Indian Automotive sector in 2025, varied from 3.4 million to 19 million; in Construction from 9 million to 29 million.
There were methodological reasons for the variations and inaccuracies. Firstly, the methodology was non systemic. The models excluded social and political forces that are not easy to quantify. Secondly, some estimators were biased. Those vested in the new technologies are biased to make positive projections.
The other reason why impacts of technologies with transformative protential cannot be predicted is because their trajectory depends on how they will be regulated, and by whom. Therefore, what will happen in the future depends on what will be done here and now, and by whom, to regulate the technology. This is a political process.
Early developers of transformative technologies always want to control its proliferation to retain their own power. With AI, the world is at a “nuclear” moment again, 80 years after the power of nuclear energy was unleashed in Hiroshima. Regulation of nuclear energy has been controlled since then by its first large producer.
AI evangelists, inventors, and owners, promote its benefits, in healthcare, education, commerce, etc. Others are concerned about AI’s dark side: loss of privacy, and the oligarchy of private companies controlling technology platforms and AI applications, who seem to be controlling our lives and even our governments. AI is giving the most powerful even more power. Thoughtful people, not yet brain-washed by AI evangelists and technology corporations, do not want to leave regulation to the conscience of the richest companies and individuals.
Let’s take forecasts of AI’s benefits by its promoters with a pinch of salt. Let’s look to someone more neutral—the IMF. The IMF takes a more systemic view and recognizes that the impacts of AI will differ in different countries, depending on their economic, social, and political structures. The IMF says, AI will impact only 26% of employment in India. And that it will benefit 14% of job categories and have a negative impact on 12%. In other words, the overall impact of AI on jobs and incomes in India will be insignificant in the bigger scheme of things. Let’s understand the bigger picture of the Indian economy to find solutions for the insufficiency of jobs and incomes: technology is a distraction. What are the structural impediments preventing the growth of decent jobs and incomes?
A fundamental problem is the way in which policies for deep structural reforms are developed. Let’s return to the IMF for some pointers. The IMF has examined why many governments have been forced to dilute IMF-backed structural reforms over the past decade and even to backtrack. The IMF World Economic Outlook Report (October 2024) concludes that stakeholders are not consulted sufficiently before policies are designed, because experts think that common people do not understand their own problems as well as experts do. Consultations, if any, with the common people and their representatives are pro forma and insincere. Unsurprisingly, says the IMF, reforms are resisted when they are imposed on the people.
In conclusion, AI is marginal to India’s jobs and incomes challenge. Better solutions will be found by improving the process of reforming labor, land, and agriculture policies. Solutions cannot be found by data analysis. Nor can think tanks and experts find the right solutions alone. Policymakers must listen more intently, and deeply, to common people, here in India, for understanding how the economy should be reformed and technology applied judiciously. Then, better solutions will emerge for increasing employment and incomes faster in the lower half of the pyramid, which can give an impetus for businesses to invest in growth.
The intended beneficiaries of the structural reforms required to increase jobs and incomes are farmers and workers and small enterprises, principally those in the informal sector, not the providers of finance and technology who fund the research and publish reports. They must be consulted honestly before the reforms are outlined as the IMF report suggests. They know the system in which they live.
(Published in LiveMint, January 29 2025)