Trade Analytics

Artificial Intelligence for real economic transformation

September 24, 2018

AI will be a disruptive game changer in the coming decade, altering the competitiveness of industries and even nations. India must leverage its advantages and current momentum to be a leader in this field.

Technology-led disruption is transforming the landscape for companies, industries and even nations today at such a fast pace that it does not even surprise us anymore. Consider for instance the growth in smartphone penetration in India. In 2017, 291.6 million Indians were using the smartphone (growing from 123.3 million in 20141) according to research firm eMarketer, a figure which is expected to rise to 337 million by the end of 2018, a rise of 15.6%2 (eMarketer's own forecast in 2014 projected only 279.2 million smartphone users in India by 20183). This figure is expected to rise to 491 million by 2022, implying a penetration of 36.2%4.

The growing penetration of mobile technology in our daily lives is giving rise to massive amounts of data, which has been recognised as the 'Oil' of the 21st century. Data costs in India have declined drastically by 93% between 2014 and 2017, while usage of data has increased by 25 times according to the Department of Telecom5. A report published by Cisco in 2017 projects that global mobile data traffic will grow seven-fold between 2016 and 2021.

The availability of large amounts of data is the fuel for the emergence of the Artificial Intelligence (AI) as a field with truly game changing potential for India and the world at large. AI is defined by Encyclopedia Britannica as "the ability of a digital computer or computer-controlled robot to perform tasks commonly associated with intelligent beings"6 . While the ability of computers to perform tasks has enhanced consistently since the 1940s when the first digital computer was developed, the availability of huge amounts of data in the present time certainly opens up enormous possibilities for in terms of the actionable insights that it can generate. Moreover, while machines cannot yet mimic human ability and intelligence across disciplines in the 'sci-fi' sense, AI is already proving its mettle in specific areas like medical diagnosis, voice recognition, search engines, route optimisation, personal assistants (Siri), self-driving cars (Tesla), predictive capabilities for customer behaviour to ascertain optimal go-to-market approach (Amazon, Flipkart), etc.

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Source: Accenture report titled 'Rewire for Growth – Accelerating India's economic growth with Artificial Intelligence'

A study by PwC in 2017 has projected that AI adoption will provide an additional rise of 14% to global GDP, or US$ 15.7 trillion by 20307. GDP improvements in local economies from AI can be as high as 26% during the period8. Accenture estimates in a report titled 'Rewire for Growth' that AI has the potential to add US$ 957 billion to the Indian economy in 2035, equivalent to 15% of current GVA9. The report identifies the transformative potential of AI in at least three areas - mobilise intelligent automation for complex physical tasks requiring adaptability and agility, complementing the skills of existing workforces and driving innovations10. In the Accenture TechVision 2017 survey that covered business and IT executives, around 80% of the respondents from India felt that AI will bring either complete transformation or significant change in their respective organisations in the next three years, as opposed to the global average of 68%11. Around 53% of them expected to make extensive investment in AI-related technologies over three years compared to the global average of 37%12.

NITI Aayog has published a working paper on AI in June 2018; defining India's planned approach towards AI with the hashtag #AIforAll - a national strategy to leverage the technology to ensure inclusive growth. It has identified sectors where the Government of India can play a leading role - healthcare, agriculture, education, smart cities and infrastructure and smart mobility and transportation. The approach paper also stresses on focus areas to leverage the potential of AI that include enhancing research capabilities and pursuing 'moonshot research projects', skilling and reskilling the workforce, a national marketplace for AI to ensure fast development and deployment, Ethics Councils to address concerns of ethical issues with data, measures to ensure data privacy and security and a robust IP framework13.

Besides timely Government intervention and intent, India has some major advantages in the AI field, which include demographic dividend, the availability of skilled manpower and a robust startup ecosystem. The country produced 2.6 million STEM graduates in 2016 (science, technology, engineering and mathematics)14. The Indian IT industry had a total employee base of around 3.9 million in 2017 and NASSCOM projects that 2.5 to 3 million new jobs will be created by 202515. A LinkedIn report has concluded that India has the third largest penetration of AI skills in the world after US and China16.

Furthermore, India had the third largest number of AI startups among G-20 nations in 2016, growing at a CAGR of 86% since 201117 . Investment in AI startups in India has grown to US$ 73 million in 2017 from US$ 44 million in the previous year18 . AI adoption is led by banking and financial services, retail, healthcare and manufacturing. Around 38% of enterprises were using AI by the end of 2017, and this is expected to increase to 62% this year19 .

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Source: NITI Aayog

Given India's distinct advantages and positive momentum in AI at present, the field certainly merits the focussed attention of the Government, industry and academia. India has the clear potential to be a leading force in AI deployment and also be, as NITI Aayog envisions, an AI hub for the developing and emerging economies (ex-China) in the coming years.


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