India is attracting billions in investment pledges from industry heavyweights such as Microsoft and Google to support its artificial intelligence ambitions.
That could be good news for India’s markets and broader economy, but it is too early to gauge how AI will affect the country, a top government adviser said.
“Globally…there is a lot of noise compared to signal because of the fear and the anticipation and the hype,” said V. Anantha Nageswaran, India’s chief economic adviser, in an interview with The Wall Street Journal.
Big Tech is drawn to India’s 1.4 billion consumers, many of whom are heavy users of data and AI chatbots. The government is also pushing to build a domestic AI industry.
While AI can’t be ignored, it isn’t yet clear whether its impact will be positive or negative, Nageswaran said.
Some argue that AI will deliver productivity gains and boost growth. Others warn it is diverting capital from other parts of the economy, concentrating spending on data centers and technology infrastructure.
Nageswaran sees risks in India’s labor market, including the potential for AI to slow hiring as jobs are displaced or roles change.
Affordability could become an issue in India price-sensitive market. AI apps are often offered cheaply to gain market share, he said, but companies could raise prices once they are established, making the technology unaffordable, Nageswaran said.
“My worry is about whether the benefits of AI will diffuse to all people.”
Supply-chain vulnerabilities are also a concern, said Nageswaran, citing technological developments or geopolitical developments as key aspects.
Rapidly changing technology is already pushing up hardware costs for smartphones and laptops. Some countries also weaponize goods, such as chips or raw materials, he said.
Copper could face shortages due to its usage in data centers and AI technology, he said.
“Countries have to create buffers of critical resources. That’s another area of importance for India to sustain its growth,” he said, citing examples like crude oil, basic metals, fertilizers and health ingredients.
Still, he acknowledged the technology’s potential benefits.
Part of the capital outflows from Indian markets last year reflected investors’ belief that India lacked an “AI story,” Nageswaran said at a recent press conference.
By that logic, developing the sector will attract more capital.
“We need to work on the assumption that AI diffusion is here to stay,” Nageswaran said. “We just need to be proactive, observe the trends. Hopefully we can anticipate some of them earlier and then prepare ourselves.”
Write to Kimberley Kao at kimberley.kao@wsj.com