The Reserve Bank of India predicts that generative artificial intelligence will contribute up to $438 billion to India's GDP in 2029-2030, noting that the proportion of Indian companies integrating artificial intelligence in the production process has increased from 8% in 2023 to 25%. This is based on India's booming development in the digital economy, financial technology and IT industries, as well as its huge talent pool and young population. The report also highlights the popularity of digital financial services, such as mobile banking, online account opening and widespread use of digital KYC services, as well as the substantial growth in UPI transaction volume. However, the report also points out the challenges posed by new technologies, such as the impact on traditional technologies and the labor market, as well as cybersecurity and data privacy issues.
Recently, the Reserve Bank of India (RBI) issued an important prediction at the Digital Technology, Productivity and Economic Growth Conference, saying that generative artificial intelligence (Gen AI) will contribute to India's gross domestic product (GDP) in 2029-2030. A whopping $438 billion. At the same time, the proportion of Indian companies integrating artificial intelligence in the production process has increased from 8% in 2023 to 25% in 2024.
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Michael Debabrata Patra, deputy governor of the Reserve Bank of India, pointed out that India has currently committed to investing 1.25 trillion rupees to develop the semiconductor industry. Based on growth trends in recent years, the digital economy is expected to account for one-fifth of India's GDP by 2026, up from about one-tenth currently. He said that India has a rich talent pool in the field of artificial intelligence and has the unique advantage of further exploring and optimizing growth opportunities through digital public infrastructure, a booming information technology industry, and a young population.
He also mentioned that India is at the forefront of the digital revolution in the field of financial technology, and the rapid development of digital payments is also driving this process. However, the emergence of new technologies also brings many challenges, such as disruptions to traditional technologies and the labor market, high demand for resources, and potential cybersecurity threats and data privacy issues.
Talking about how digitalization is driving India’s financial sector, Patra provided micro-level evidence showing that all Indian banks have implemented mobile and internet banking, with 75% offering online account opening and digital KYC services, 60 % make digital loans, 50% offer payment aggregation services, and 41% use chatbots. Digitalization has brought significant productivity gains to the banking industry.
He also cited the launch of the Unified Payments Interface (UPI) in 2016 as a major milestone, reaching 16.6 billion transactions in October, with successful instant debit withdrawal rates rising to 86% from 77% last year. In addition, the concept of embedded finance is also developing rapidly, with the global market estimated to reach US$66.8 billion in 2022 and expected to achieve an average annual growth of 25.4% between 2023 and 2032.
About 40% of India's rural population and the Internet usage rate among the 20-30 age group is as high as 78%. As more and more households consume online, Indian financial technology companies are providing various technical solutions to small and medium-sized enterprises to help them optimize their operations. Finally, Patra mentioned that India is also cooperating with international organizations to explore the connection of open financial API frameworks in different countries and promote the balance between risk management and financial innovation.
Highlight:
Generative artificial intelligence is expected to contribute up to US$438 billion to India's GDP in 2029-2030, and the enterprise AI integration rate will increase to 25%.
Digital financial services are becoming increasingly popular in India, with 75% of banks implementing online account opening and digital KYC, and the number of UPI transactions increasing significantly.
The embedded finance market is growing rapidly, with a market size of US$66.8 billion in 2022, and is expected to grow at an average annual rate of 25.4% over the next ten years.
All in all, India is expected to gain huge development opportunities in the era of artificial intelligence with its booming digital economy and financial technology industry, as well as its large talent pool. However, we must also pay attention to and actively respond to the challenges posed by new technologies in order to achieve sustainable and balanced growth.