Skewed impact likely

Parsa Venkateshwar Rao Jr

Senior Journalist

THE TRIBUNE DEBATE: Economic implications of artificial intelligence

WHAT made artificial intelligence (AI) the buzzword of 2023 was OpenAI’s ChatGPT, the generative AI product which seems to entice and terrify at the same time about what it can do and how it can replace humans. But it is neither a magic wand nor a devouring dragon. It is a technological turn, but a major one. What robotics was at the hardware level, AI is in the software sphere, a great enabler which offers fresh ways of doing things. Hopes are running high about AI and everyone is only too eager to discuss, debate and speculate about its prospects and fallout. At the World Economic Forum’s annual jamboree of heads of government, tycoons, chiefs of central banks and economists in Davos, AI replaced cryptocurrency and digital currency as the talking point this week.

AI is not going to sweep across the entire economy like a tidal wave; rather, it will penetrate different sectors over a period of time, spanning a decade or two.

As with computerisation and robotics, the talks centred on how AI would have an impact on jobs, with concerns that people would be left without work because AI would replace them at many points. On the flip side, it would, of course, boost growth and even increase profits. But there are no exact numbers to pinpoint the effect. It is still in the realm of jobs that would probably be lost or the anticipated boost to economic growth. There is also a substantial section of experts which believes that AI would not have much impact on economic growth, at least in the short term. This means that in the analysis of economic growth, there may not be a need to place too much emphasis on the significance of AI. Concerns about AI and its revolutionary impact might seem a little premature from this point of view.

An International Monetary Fund (IMF) study released on January 14 gives an estimate of the impact AI would make on economic growth. IMF Managing Director Kristalina Georgieva made a big-bang statement in her blog post: “We are on the brink of a technological revolution that could jumpstart productivity, boost global growth and raise incomes around the world. Yet, it could also replace jobs and deepen inequality.” The analysis provided by IMF experts indicates that advanced economies are expected to reap greater economic benefits from AI. Though some jobs would be lost, there would be gains in better-skilled ones. Another observation is that the impact of AI may be less pronounced in emerging economies in terms of growth and benefits because they are not in a position to take advantage of the developments in the AI arena.

This is pretty evident because the advancements in AI in the US are predominantly driven by private enterprises. Tech giants like Google and Microsoft are actively competing to push the boundaries of AI research and application, investing billions of dollars to expand the field. The disadvantage faced by emerging economies, which still depend on foreign direct investment and technological collaboration with the US and Europe, is quite evident. The Indian semiconductor industry, which is at the heart of AI research and development, is still in a fledgling state, and the US is trying to deny access to technology to China in this field. India hopes to forge ahead in AI because it believes that, compared to China, access to Western technology is relatively higher for it.

However, it has to be recognised that AI is not going to sweep across the entire economy like a tidal wave; rather, it will penetrate different sectors over a period of time, spanning a decade or two. So, India, China and many other economies can continue to grow through the traditional agricultural and manufacturing segments. Even a large chunk of the services sector would remain outside the periphery of AI.

What AI would offer the developed world is a technological edge over the rest of the world, a competitive advantage it has enjoyed since the beginning of the Industrial Revolution. Emerging economies like India, Indonesia, Nigeria, Mexico and Brazil, apart from China, would need to achieve a quantum leap in science and technology to position themselves ahead of the West. Japan has seemed to have achieved parity with the West in terms of technology, but its economy has been stagnating for more than two decades now. India would require a long-term perspective to catch up on the technology front, and there are many domestic issues that still need to be addressed.

Pratham’s Annual Status of Education Report for 2023, titled ‘Beyond basics’, highlights areas of concern in the age group of 14-18 years in rural India, particularly in terms of shaky foundations in literacy and numeracy. The fact that 90 per cent of this segment has access to a mobile phone and, through it, to social media and the Internet is a deceptive sign of development. The demographic dividend will remain elusive for India if the skill level of the young segment of the population is not upgraded.

AI would indeed be a crucial factor, and it is sure to become as ubiquitous as social media sooner rather than later. However, it will not alter some of the social structures associated with the urban/rural, skilled/unskilled and educated/better-educated divide. At the moment, it appears that it will favour the urban, skilled and better-educated segments of the population. It was assumed that economic development would lead to improvements in social development, a trend that has held true for some time now. However, the paradigm is shifting towards the idea that social development is a prerequisite for economic development. Governments, businesses and civil society will need to reprioritise the social aspect over the economic one to foster growth.

Improving schools is as important as universalising enrolment at this stage. It is indeed the case that this is no longer solely a problem for developing economies; it is a challenge also for advanced economies like the US, Europe and Japan. Besides, there is the continuing danger of brain drain from India as the better-educated ones leave for the US to manage the AI frontier.

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