The Economic Impact of Artificial Intelligence on Employment and Productivity in India

Abstract

Artificial Intelligence (AI) has become an important component of the digital transformation of the Indian economy, influencing production processes, service delivery, employment structures and the organisation of work. The increasing use of AI across information technology, banking, manufacturing, healthcare, education, agriculture and other sectors has generated opportunities for productivity improvement and the creation of new technology-oriented occupations. At the same time, AI adoption has raised concerns regarding occupational displacement, skill mismatches, inequality and the need for continuous reskilling. This study examines the trends in AI adoption, AI-related employment and productivity in India during 2021–2025. The study is based exclusively on secondary data obtained from government institutions, international organizations, industry reports and published academic literature. Percentage analysis, Annual Growth Rate (AGR), Compound Annual Growth Rate (CAGR) and comparative trend analysis are used to describe changes during the study period. The available evidence indicates a substantial expansion of AI adoption and AI-related employment alongside an increase in the productivity index during the period. However, the study does not establish a causal relationship between AI adoption and employment or productivity because it relies primarily on descriptive secondary data and does not employ firm-level or sector-level econometric identification. The findings also indicate that the employment effects of AI are uneven: AI may create new opportunities for workers possessing specialized digital skills while increasing adjustment pressures for workers performing routine or automatable tasks. The study therefore highlights the importance of reskilling, digital infrastructure, inclusive education, responsible AI governance and labour-market transition policies. Future research should employ firmlevel, sector-level and panel datasets to identify the causal effects of AI adoption on employment and productivity in India.