What is the projected impact of Artificial Intelligence (AI) on global and Indian economic growth according to the IMF?

IMF’s Growth Projection: The IMF estimates that Artificial Intelligence could raise global growth by approximately 0.8 percentage points, potentially pushing world growth beyond pre-COVID levels. For India, this boost could significantly support its ambition of becoming a developed nation under the Viksit Bharat vision. AI-driven productivity gains, efficiency improvements, and innovation across sectors such as manufacturing, healthcare, finance, and governance can expand economic output.Mechanism of Growth Enhancement:Productivity gains: Automation and intelligent systems reduce operational inefficiencies.Skill premium: Workers with AI-related skills command higher wages, increasing purchasing power.Multiplier effect: Higher incomes generate demand for services, creating additional employment.IMF research from the United States indicates that one AI-enhanced job can generate 1.3 total jobs in aggregate employment. However, growth benefits will depend on digital infrastructure, skill development, and policy preparedness, especially in emerging economies like India.

Why does the IMF caution against ‘sugarcoating’ AI’s impact , and what are the major risks involved?

The IMF warns against ‘sugarcoating’ AI because while it offers transformative economic benefits, it also poses serious structural risks. Ignoring these risks could lead to social unrest similar to backlash against globalization, where aggregate benefits masked localized distress.Three major risks identified:Rising Inequality: Countries and individuals with access to AI technologies will benefit disproportionately, widening global and domestic inequality.Financial Stability Risks: AI-driven algorithms in financial markets could amplify volatility, create flash crashes, or systemic shocks if left unregulated.Labour Market Displacement: Approximately 40% of global jobs may be affected, with up to 60% in advanced economies. Entry-level and routine jobs are particularly vulnerable.The concern is that without proactive social protection and skill transition policies, AI could deepen economic divides, leading to political instability and resistance to technological progress.

How can countries like India prepare their labour markets for the AI transition?

Education Reform: The IMF emphasizes that people must ‘learn to learn’ rather than focus solely on specific technical skills. This implies revamping curricula to emphasize critical thinking, adaptability, digital literacy, and interdisciplinary learning. India’s National Education Policy (NEP) 2020 already moves in this direction by promoting skill-based and flexible education.Policy Interventions:Reskilling and Upskilling Programs: Large-scale digital skill missions and AI-focused vocational training.Social Protection: Strengthening unemployment insurance and income support for displaced workers.Industry-Academia Collaboration: Aligning education output with AI skill demand.For example, in the U.S., 1 in 10 jobs now requires additional AI-related skills and pays better wages. India can leverage its demographic dividend by investing in digital infrastructure and human capital, thereby turning AI disruption into an opportunity.

What explains the uneven impact of AI across advanced and emerging economies?

The uneven impact of AI stems from differences in technological readiness, skill availability, and economic structure. Advanced economies have higher automation exposure because a larger share of jobs involves routine cognitive tasks susceptible to AI integration. This explains why up to 60% of jobs in advanced economies may be affected compared to 40% in emerging markets.Structural Factors:Digital Infrastructure: Countries with robust digital ecosystems adopt AI faster.Skill Supply-Demand Mismatch: Some countries have surplus AI skills but limited demand, while others face skill shortages.Sectoral Composition: Economies reliant on manufacturing and services face different AI exposure patterns.Thus, AI may widen global inequality unless emerging economies like India invest strategically in human capital and innovation ecosystems to remain competitive.

Critically analyse whether AI will ultimately be a net job creator or job destroyer .

AI’s impact on employment is complex and dualistic. On one hand, it automates routine and entry-level tasks, potentially eliminating low-paying jobs. On the other, it enhances productivity and creates new roles in data science, AI ethics, cybersecurity, and advanced manufacturing.Arguments for Net Job Creation:Higher productivity leads to economic expansion and demand for services.New industries emerge around AI technologies.Complementary roles in oversight, maintenance, and innovation expand.Arguments for Job Destruction Risks:Displacement may be rapid, resembling a ‘tsunami’ effect.Transition costs disproportionately affect low-skilled workers.Geographic and sectoral imbalances may persist.The IMF’s finding that one AI job may create 1.3 aggregate jobs suggests overall positive employment impact, but distributional concerns remain critical. Policy agility and ethical governance will determine whether AI becomes inclusive growth or exacerbates inequality.

Discuss India’s AI ambitions in light of IMF warnings as a case study of balancing innovation and inclusion .

India’s aspiration to achieve Viksit Bharat by leveraging AI presents a compelling case of balancing technological advancement with social equity. With a vast talent pool and expanding digital infrastructure such as UPI and Digital India initiatives, India is well-positioned to harness AI-driven growth.Opportunities:Enhancing governance through AI-enabled public service delivery.Boosting manufacturing competitiveness under Make in India.Expanding AI-driven startups and innovation ecosystems.Challenges:Large informal workforce vulnerable to displacement.Digital divide between urban and rural areas.Need for ethical guardrails and regulatory clarity.India must invest simultaneously in education reform, social protection systems, and AI ethics frameworks. This balanced approach can ensure that AI serves as a ‘force for good’ rather than triggering social fragmentation, thereby translating technological opportunity into sustainable and inclusive development.

The Dual Impact of AI on India's Viksit Bharat Vision

AI offers growth potential for India but also presents significant job displacement risks that must be addressed strategically.

Gopi

•February 21, 2026•6 mins read

IMF: AI may boost growth by 0.8%, but poses job and financial risks

Not Started

1. AI as a Growth Multiplier: Opportunity for Viksit Bharat

Artificial Intelligence (AI) is emerging as a transformative force in global economic restructuring. The IMF Managing Director has projected that AI could increase global growth by 0.8 percentage points, potentially pushing the world economy to grow faster than in the pre-COVID period. For India, this growth impulse aligns with the long-term vision of achieving Viksit Bharat (Developed India).

The significance of this projection lies in AI’s ability to enhance productivity, improve efficiency, and create new economic opportunities. Higher growth rates translate into increased fiscal space, better employment prospects, and stronger developmental outcomes.

For India, which has a demographic advantage and expanding digital infrastructure, AI-driven growth can accelerate structural transformation—from a labour-intensive economy to a knowledge-based, innovation-driven economy. However, realising this potential depends on readiness in digital infrastructure, skill ecosystems, and institutional frameworks.

“AI can lift up global growth by almost a percentage point… It would mean that India’s Viksit Bharat is achievable.” — Kristalina Georgieva, IMF Managing Director

If leveraged strategically, AI can act as a growth catalyst. However, without enabling ecosystems—skills, regulation, infrastructure—the projected growth dividend may remain uneven and concentrated.

Key Data:

AI could raise global growth by 0.8%
Faster growth than pre-pandemic levels
Global labour market impact: 40% of jobs
Advanced economies: 60% of jobs
Emerging markets: 40% of jobs

2. Labour Market Disruption: The “Tsunami” Effect

AI’s most immediate and visible impact is on the labour market. The IMF estimates that 40% of global jobs will be affected by AI—some enhanced, others eliminated. In advanced economies, this figure rises to 60%, reflecting higher exposure to automation.

The transformation is described metaphorically as a “tsunami”, indicating both scale and speed. Unlike previous technological revolutions that unfolded gradually, AI-driven automation is occurring within a compressed timeframe.

A critical concern is the displacement of entry-level, routine, and easily automated jobs. These roles often serve as stepping stones for young entrants into the labour market. Their elimination may reduce upward mobility and increase structural unemployment.

However, IMF research in the United States shows a more nuanced outcome. While 1 in 10 jobs already requires additional AI-related skills, workers possessing these skills earn higher wages. Moreover, AI-enhanced productivity creates demand in other sectors—leading to a multiplier effect.

Employment Effects (IMF Findings):

1 in 10 jobs in the U.S. requires new AI skills
AI-skilled jobs pay higher wages
Employment multiplier: 1 AI job → 1.3 total jobs

Labour disruption without reskilling and social cushioning can widen inequality and social unrest. Conversely, proactive skilling can convert displacement into productivity gains and net employment growth.

3. Inequality and Global Digital Divide

AI risks deepening inequality—both between and within countries. Nations that invest early in digital infrastructure, AI adoption, and skills may reap disproportionate benefits, while laggards risk technological marginalisation.

This creates a potential divide:

Countries with AI capability and demand
Countries with AI skills but limited domestic demand
Countries with neither skills nor infrastructure

Such divergence may intensify global economic asymmetries. Within countries, AI may disproportionately benefit high-skilled workers while displacing low-skilled labour, leading to income polarization.

The IMF cautions against “sugarcoating” AI’s impacts, drawing parallels with globalisation—where aggregate gains masked severe localised distress.

“Not sugarcoat the picture… otherwise we end up where we ended up with globalisation.” — Kristalina Georgieva

If inclusivity is not built into AI policy frameworks, technological progress may provoke social backlash, undermining both economic reforms and democratic legitimacy.

4. Financial Stability Risks

Beyond employment, AI presents systemic financial risks. Automated trading systems, algorithmic decision-making, and AI-driven financial models can amplify volatility if poorly regulated.

The concern is that AI systems, if inadequately supervised, may trigger rapid, unpredictable movements in financial markets. The risk is not merely technological but institutional—stemming from insufficient guardrails and oversight.

This dimension links AI to macroeconomic governance and financial regulation (GS3). As financial systems grow increasingly algorithm-dependent, supervisory institutions must upgrade regulatory tools and risk assessment mechanisms.

Failure to integrate AI risk into financial supervision could lead to market instability, erosion of investor confidence, and systemic crises.

5. Ethical Foundations and Governance Frameworks

A central concern highlighted is the imbalance between technological advancement and ethical preparedness. While progress has been rapid on the technical front, ethical guardrails and regulatory frameworks remain underdeveloped.

The challenge is to design regulations that:

Protect financial stability
Prevent misuse
Safeguard privacy and fairness
Avoid stifling innovation

This aligns with the broader debate on responsible AI governance—balancing innovation with accountability. Ethical frameworks must evolve alongside technology, not after crises occur.

For India, this intersects with data governance, digital public infrastructure, and institutional capacity-building.

Without ethical foundations, AI may undermine trust in institutions. Sustainable technological progress depends on credibility, transparency, and accountability.

6. Education, Skilling and Social Protection Reform

The transformation driven by AI necessitates a structural shift in education systems. Rather than focusing solely on specific technical skills, systems must cultivate adaptability and lifelong learning.

The emphasis is on:

Learning-to-learn capabilities
Continuous reskilling
Digital literacy
Cognitive flexibility

Simultaneously, robust social protection mechanisms are required to cushion displaced workers. Transitional income support, retraining subsidies, and labour market flexibility will be crucial.

For India, this connects with:

National Education Policy (NEP) reforms
Skill India Mission
Digital India initiatives
Social security expansion for informal workers

Without education reform and social safety nets, AI-induced transitions may generate structural inequality. With them, the transition can become inclusive and productivity-enhancing.

7. India’s Strategic Position in AI Adoption

India stands at a strategic inflection point. With strong digital public infrastructure (Aadhaar, UPI, Digital India) and a large young workforce, it has structural advantages.

However, realising AI dividends requires:

Rapid infrastructure deployment
Bridging skill-demand mismatches
Ethical AI governance
Institutional agility in policymaking

The IMF emphasises agility—policy frameworks must adapt continuously as AI evolves.

India’s ability to synchronise infrastructure, skilling, regulation, and inclusion will determine whether AI becomes a growth accelerator or a source of inequality.

Conclusion

Artificial Intelligence represents both an economic accelerator and a structural disruptor. The projected 0.8% global growth boost signals transformative potential, particularly for India’s Viksit Bharat vision. However, labour displacement, inequality, financial risks, and ethical deficits require proactive governance.

Sustainable AI-led development will depend on inclusive skilling, ethical regulation, financial safeguards, and adaptive institutions—ensuring technology serves as a force for equitable growth rather than systemic disruption.

Quick Q&A

Everything you need to know

IMF’s Growth Projection: The IMF estimates that Artificial Intelligence could raise global growth by approximately 0.8 percentage points, potentially pushing world growth beyond pre-COVID levels. For India, this boost could significantly support its ambition of becoming a developed nation under the Viksit Bharat vision. AI-driven productivity gains, efficiency improvements, and innovation across sectors such as manufacturing, healthcare, finance, and governance can expand economic output.

Mechanism of Growth Enhancement:

Productivity gains: Automation and intelligent systems reduce operational inefficiencies.
Skill premium: Workers with AI-related skills command higher wages, increasing purchasing power.
Multiplier effect: Higher incomes generate demand for services, creating additional employment.

IMF research from the United States indicates that one AI-enhanced job can generate 1.3 total jobs in aggregate employment. However, growth benefits will depend on digital infrastructure, skill development, and policy preparedness, especially in emerging economies like India.

The IMF warns against ‘sugarcoating’ AI because while it offers transformative economic benefits, it also poses serious structural risks. Ignoring these risks could lead to social unrest similar to backlash against globalization, where aggregate benefits masked localized distress.

Three major risks identified:

Rising Inequality: Countries and individuals with access to AI technologies will benefit disproportionately, widening global and domestic inequality.
Financial Stability Risks: AI-driven algorithms in financial markets could amplify volatility, create flash crashes, or systemic shocks if left unregulated.
Labour Market Displacement: Approximately 40% of global jobs may be affected, with up to 60% in advanced economies. Entry-level and routine jobs are particularly vulnerable.

The concern is that without proactive social protection and skill transition policies, AI could deepen economic divides, leading to political instability and resistance to technological progress.

Education Reform: The IMF emphasizes that people must ‘learn to learn’ rather than focus solely on specific technical skills. This implies revamping curricula to emphasize critical thinking, adaptability, digital literacy, and interdisciplinary learning. India’s National Education Policy (NEP) 2020 already moves in this direction by promoting skill-based and flexible education.

Policy Interventions:

Reskilling and Upskilling Programs: Large-scale digital skill missions and AI-focused vocational training.
Social Protection: Strengthening unemployment insurance and income support for displaced workers.
Industry-Academia Collaboration: Aligning education output with AI skill demand.

For example, in the U.S., 1 in 10 jobs now requires additional AI-related skills and pays better wages. India can leverage its demographic dividend by investing in digital infrastructure and human capital, thereby turning AI disruption into an opportunity.

The uneven impact of AI stems from differences in technological readiness, skill availability, and economic structure. Advanced economies have higher automation exposure because a larger share of jobs involves routine cognitive tasks susceptible to AI integration. This explains why up to 60% of jobs in advanced economies may be affected compared to 40% in emerging markets.

Structural Factors:

Digital Infrastructure: Countries with robust digital ecosystems adopt AI faster.
Skill Supply-Demand Mismatch: Some countries have surplus AI skills but limited demand, while others face skill shortages.
Sectoral Composition: Economies reliant on manufacturing and services face different AI exposure patterns.

Thus, AI may widen global inequality unless emerging economies like India invest strategically in human capital and innovation ecosystems to remain competitive.

AI’s impact on employment is complex and dualistic. On one hand, it automates routine and entry-level tasks, potentially eliminating low-paying jobs. On the other, it enhances productivity and creates new roles in data science, AI ethics, cybersecurity, and advanced manufacturing.

Arguments for Net Job Creation:

Higher productivity leads to economic expansion and demand for services.
New industries emerge around AI technologies.
Complementary roles in oversight, maintenance, and innovation expand.

Arguments for Job Destruction Risks:

Displacement may be rapid, resembling a ‘tsunami’ effect.
Transition costs disproportionately affect low-skilled workers.
Geographic and sectoral imbalances may persist.

The IMF’s finding that one AI job may create 1.3 aggregate jobs suggests overall positive employment impact, but distributional concerns remain critical. Policy agility and ethical governance will determine whether AI becomes inclusive growth or exacerbates inequality.

India’s aspiration to achieve Viksit Bharat by leveraging AI presents a compelling case of balancing technological advancement with social equity. With a vast talent pool and expanding digital infrastructure such as UPI and Digital India initiatives, India is well-positioned to harness AI-driven growth.

Opportunities:

Enhancing governance through AI-enabled public service delivery.
Boosting manufacturing competitiveness under Make in India.
Expanding AI-driven startups and innovation ecosystems.

Challenges:

Large informal workforce vulnerable to displacement.
Digital divide between urban and rural areas.
Need for ethical guardrails and regulatory clarity.

India must invest simultaneously in education reform, social protection systems, and AI ethics frameworks. This balanced approach can ensure that AI serves as a ‘force for good’ rather than triggering social fragmentation, thereby translating technological opportunity into sustainable and inclusive development.