Generative AI to Contribute $359-$438 Billion to India’s GDP by FY30: RBI Deputy Governor

Generative AI could significantly boost India’s economy, potentially adding between $359 billion and $438 billion to the country’s GDP by the fiscal year 2029-30, according to Michael Debabrata Patra, Deputy Governor of the Reserve Bank of India (RBI). Patra shared these projections during the DEPR Conference on “Digital Technology, Productivity and Economic Growth in India” held in Jaipur.

India’s adoption of AI in business operations has notably increased, with AI integration in production rising from 8% in 2023 to 25% in 2024. “India is uniquely positioned to capitalize on growth opportunities,” said Patra, “thanks to its robust digital public infrastructure, a thriving IT sector, and one of the world’s largest AI talent pools.”

Generative AI is forecasted to add a substantial boost to global GDP as well, with potential contributions estimated between $7 to $10 trillion over the next three years. Large language models alone may drive worker productivity up by 8% to 36%, reshaping productivity trends worldwide.

Patra highlighted advancements in India’s banking sector, noting that mobile and internet banking are universally implemented among Indian banks. In addition, 75% of banks now offer digital KYC, online account opening, and doorstep banking, while 60% provide digital lending options, 50% support payment aggregator services, and 41% utilize AI chatbots. Private sector banks are leading the charge in adopting these technologies, with initiatives such as open banking (24%) and IoT integration (10%).

Policy support will be essential to unlock the economic potential offered by digital innovation, Patra emphasized. Key policy priorities include fostering competition, reducing market concentration, and enabling efficient resource allocation to support growth.

Additionally, digital technologies are influencing productivity by lowering costs and expanding the variety of financial services. Digital assets and technology prices continue to decline, allowing businesses to operate more effectively and meet competitive demands. Innovations in finance are enhancing intermediation and facilitating cross-border flows, making transactions faster, cheaper, and more transparent.

Patra also referenced the KLEMS framework (Capital, Labour, Energy, Materials, and Services) as a method to measure digitalization’s impact on productivity. Breaking down data into ICT capital, human capital, and complementary investments can reveal deeper insights into technology’s contributions to productivity, though this analysis requires robust, granular data which remains a challenge.