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Opinion: Nandan Nilekani and Tanuj Bhojwani.

India is on the brink of a transformation that could change its economic and social future.

Before the end of this decade, more Indians will use AI every day than in any other country in the world. What’s more, people in advanced economies will be surprised by the ways the country will use AI. India is on the cusp of a technological revolution that could alter the trajectory of its social and economic future, and in this revolution there are lessons for the rest of the world.

Our prediction hinges on three facts: India needs it, India is ready for it, and India will do it.

India needs it
The concept of “China plus one” has been gaining traction, with its admonition that global companies should not depend inordinately on China for their manufacturing and software needs. India, with its growing infrastructure investments, favorable policies, and young working population, is the most likely beneficiary of this shift. It is perhaps the only country poised to match the scale of China.

With 1.4 billion people, India is closer to a continent than a country. Its population is almost twice that of Europe. But the average age in India is 28, compared with Europe’s 44, which means a higher share of the population is of working age. This is the starting point: India is a very large country of very young people.

This demographic dividend, favorable global trends, and the unlocking of decades of suppressed potential are starting to show returns. Even as the macroeconomic projections for most of the world seem modest or bleak, India remains a bright spot. These young Indians are aspirational and motivated to use every opportunity to better their lives.

What really sets India apart from the West are its unique challenges and needs. India’s diverse population and complex socioeconomic concerns mean that AI there is not just about developing cutting-edge technology. It’s about finding innovative solutions to address pressing problems in health care, education, agriculture, and sustainability.

Though our population is just double the size of Europe’s, we are much more diverse. Indians, like Europeans, are often bi- or multilingual. India recognizes 19,500 dialects spoken by at least 10,000 people. Based on data from the Indian census, two Indians selected at random have only a 36 percent chance of speaking a common language.

This language barrier is complicated by the fact that the official literacy rate in the country hovers near 77 percent, varying vastly between states. This means that roughly 1 in 4 people can’t read or write. Even though the government tries to provide welfare assistance for its most vulnerable, it’s hard to spread awareness about the service and reach the last mile. Filling out a simple form to access welfare can be daunting for someone who is illiterate. Determining eligibility for assistance means depending on someone who can read, write, and navigate the bureaucracy. Actually receiving services means assistance seekers must have an agent helping them who is not misinformed—or worse, corrupt. These barriers disproportionately affect those who need government assistance the most.

We have the ability to solve a lot of problems for our population, but the hard part has always been in the distribution, not the solution. In India, we believe that AI can help bridge this access gap. AI enables people to access services directly with their voice using natural language, empowering them to help themselves. As Canadian writer William Gibson aptly said, “The future is already here—it’s just not evenly distributed.” Nowhere is this more glaringly evident than in India.

The rest of the world has been eyeing AI with curiosity, waiting for real-use cases. In India, we see potential today. While this may be true of many other developing economies, the other important factor is that.

India is ready for it
India’s population isn’t just young, it is connected. According to the country’s telecommunications sector regulator, India has more than 790 million mobile broadband users. Internet penetration continues to increase, and with the availability of affordable data plans, more and more people are online. This has created a massive user base for AI applications and services.

But where India has surpassed all others is in its digital public infrastructure. Today, nearly every Indian has a digital identity under the Aadhaar system. The Aadhaar is a 12-digit unique identity number with an option for users to authenticate themselves digitally—that is, to prove they are who they claim to be.

Further, India set up a low-cost, real-time, interoperable payment system. This means that any user of any bank can pay any other person or merchant using any other bank instantly and at no cost. This system—the Unified Payments Interface—handles more than 10 billion transactions a month. It is the largest real-time payment system in the world and handles about 60 percent of real-time payment transactions worldwide.

With the success of these models, India is embracing innovation in open networks as digital public infrastructure. Take the example of Namma Yatri, a ride-hailing network built in collaboration with the union of auto-rickshaw drivers in Bangalore and launched in November 2022. These drivers have their own app, with a flat fee to use it, no percentage commission and no middleman. The app has facilitated close to 90,000 rides a day, almost as many as ride-hailing companies in the city.

Unlike Western countries, which have legacy systems to overhaul, India’s tabula rasa means that AI-first systems can be built from the ground up. The quick adoption of digital public infrastructure is the bedrock for these technologies. Such infrastructure generates enormous amounts of data, and thanks to India’s Account Aggregator framework, the data remain under the citizens’ control, further encouraging public trust and utilization. With this solid footing, India is well positioned to lead the charge in AI adoption.

India will do it
In September 2023, the Indian government, in collaboration with the EkStep foundation, launched the PM-Kisan chatbot. This AI chatbot works with PM-Kisan, India’s direct benefit transfer program for farmers, initiated in 2019 to extend financial help to farmers who own their own land. Access to the program, getting relevant information, and resolving grievances was always a problem for the farmers. The new chatbot gives farmers the ability to know their eligibility and the status of their application and payments using just their voice. On launch day more than 500,000 users chatted with the bot, and features are being released slowly to ensure a safe and risk-managed rollout.

These steps are part of an encouraging trend of early adoption of new technology by the Indian government. But the trend extends beyond the government. India’s vibrant tech ecosystem has taken off as well, a direct offshoot of its booming IT exports—currently at nearly $250 billion a year. Next to those from the US, the largest number of developers on GitHub, a cloud-based service for software development, are from India. This sector not only innovates but also widely adopts digital public infrastructure. The effect is cyclical: start-ups feed the growing tech culture and, in turn, leverage the data to build more precise and beneficial AI tools. India’s dynamic start-up ecosystem, moreover, is actively working on AI solutions to address various challenges.

AI can be a game changer in education as well, helping close the literacy gap. AI technologies are uniquely positioned to help students learn in their native languages, as well as learn English. AI’s applications are useful not only for students; they extend to teachers, who are often overwhelmed by administrative tasks that detract from teaching. As AI takes over routine tasks in government and start-ups, the roles of teachers and students evolve, and they form dynamic partnerships focused on deep learning and meaningful human interaction.

What India needs is a strategic plan to chase down the most important opportunities for AI to help. The trick is not to look too hard at the technology but to look at the problems people face that existing technology has been unable to solve. And organizations such as EkStep have stepped up with a mission called People+AI. Instead of putting AI first, they focus on the problems of people. This has led to surprising new uses unique to India.

India’s emerging status as a technological powerhouse, combined with its unique socioeconomic landscape, puts it in a favorable position to be the world’s most extensive user of AI by the end of this decade. From streamlining education to aiding in social protection programs, AI has the potential to deeply penetrate Indian society, effecting broad and meaningful change.

Nandan Nilekani is the chairman and cofounder of Infosys and founding chairman of UIDAI (Aadhaar) and Tanuj Bhojwani is head of People+AI.

Opinions expressed in articles and other materials are those of the authors; they do not necessarily reflect IMF policy.

A growth trajectory of 6.5 to 7.5 %, centred around 7 %, is reasonable in the coming years, barring the eventuality of simultaneous external shocks.

In view of its robust growth of 7.7 per cent during the first half of the current fiscal year, the Reserve Bank of India (RBI) has upgraded the full-year growth forecast for the Indian economy to 7 per cent. The erstwhile estimates by multilateral agencies and the private sector, which have hitherto varied between 6.3 and 6.5 per cent, are also likely to get revised soon to align more closely with the RBI’s estimate.

What explains this resilience of the Indian economy? Besides global demand for goods and services, the Indian economy is largely impacted by five key shocks: Deficient or erratic rainfall; a sharp increase in the price of oil; political or policy uncertainty; macroeconomic instability, including any originating in the financial sector; and global risk aversion resulting in abrupt withdrawals of capital flows and an increase in the cost of external finance.

The Indian economy has become relatively more immune to each one of these shocks.

First, the agriculture sector is less impacted by routine deficiency or erratic patterns in rainfall. This is due to crop diversification, expanded irrigation networks, and the availability of more advanced and accurate weather information, which allows for a timely policy response to shocks. This is not to say that we have overcome all the challenges emanating from climate change or weather-related events, but simply that when confronted with the same shocks as witnessed before, agricultural growth, productivity, and resilience are now higher than before.

Second, the Indian economy has achieved more insulation from sharp increases in oil prices. The oil intensity of gross domestic product or GDP (consumption of oil per unit of GDP) has been declining consistently. This trend is likely to continue as the country moves towards renewables, and with increased economic prosperity, the economy transitions toward less energy-intensive activities such as services. This insulation is partly the reason why it has been possible to maintain the current account deficit below 2 per cent of GDP over the last five years, and why it has been seemingly disconnected from global oil prices. Interestingly, with the reduced importance of oil as a source of energy worldwide, sharp spikes in oil prices may themselves become less frequent in coming years.

Third, in India’s mature democracy, elections in recent years have been conducted without any contention, as the electorates have been delivering decisive mandates. The recently concluded Assembly elections in five states further confirmed the trend that the days of a hung Parliament, hung Assemblies, or complex alliances seem to be over. This phenomenon will strengthen the perception of political and policy stability in the country, providing a more conducive environment for long-term investments.

Fourth, macroeconomic stability and a safe and efficient financial sector matter for growth. India has done well on both counts. The banking sector has fully emerged from a decade-long shadow of distressed balance sheets. Under the watchful eyes of the banking regulator, the RBI, and their partial owner, the government, the sector has supported economic growth by attaining double-digit credit growth. The non-banking parts of the financial sector have also stabilised after the mini-crisis they experienced during 2019-20.

Be that as it may, hereon, the competing objectives of growth and risks need to be balanced keenly, with neither being compromised for the sake of the other. Consumer finance is an important segment of an economy that is steadily becoming more prosperous and inclusive. It is imperative to find ways to manage the risks better and ensure that consumer finance and private consumption growth are not impaired as engines of growth in the pursuit of safety.

Finally, despite implementing prudent policy frameworks, the emerging markets economies remain susceptible to the reversals of external capital flows for reasons beyond their control. India lost nearly $40 billion worth of portfolio flows during 2021-22. Leveraging past experiences, and using the cushions built during quiet times, the RBI and the government now respond promptly to these shocks. This has further insulated the real economy from the disruptive impacts of such reversals.

All these factors do not imply that the economy is completely insulated from all kinds and severity of shocks or extreme events, whether occurring singly or simultaneously. All it means is that the economy has become much more resilient to isolated shocks of the magnitudes seen in the past.

Immunity to known shocks will likely continue to strengthen in coming years as the economy becomes more prosperous. Yet, new challenges will also emerge: An inevitably ageing population; climate-related events; technology and skills replacing labour in labour-intensive activities; and a heavily indebted world, in need of deleveraging. It would serve India well to focus on accelerating sustainable growth while continuing to reduce its susceptibility to existing and emergent shocks.

So, what might the growth numbers eventually look like during this year and the next?

Drawing from the statistical regularities highlighted by past data, GDP growth this year may turn out to be even higher than 7 per cent. These regularities are as follows: First, during the decade before Covid, the growth rate in the second half of the fiscal year lagged behind that in the first half of the year by only about an average 0.5 percentage points. Second, about 48 per cent of the economic activity was generated during the first half of the year, and the remaining 52 per cent in the second half.

Combining these two observations with the fact that no new shocks or adversities are likely to materialize during the rest of this year, one could conceive growth of about 7 per cent during the second half of the year, yielding an annual growth rate of about 7.4 per cent.

In view of its increased resilience, barring the eventuality of multiple shocks hitting the Indian economy simultaneously, a growth trajectory of 6.5 to 7.5 per cent, centered around 7 per cent, seems like a reasonable baseline scenario for next year too.

The writer is director general of NCAER, and a member of the Economic Advisory Council to the Prime Minister of India. Ayesha Ahmed contributed to this piece

Social cover. Instead of a region or income specific policy, a more universal approach would serve workers better.

While the demand for social security for platform workers heats up, the question that crops up is can one design an exclusive social security system for platform workers? And even if one could design it (like Rajasthan), should one design systems for particular groups of workers.

Isn’t a more universal system of social security more viable given the Indian context? The challenge of course is who pays for it!

The Code on Social Security, 2020 (CSS 2020) defines gig worker as a “person who performs work or participates in a work arrangement and earns from such activities outside of a traditional employer-employee relationship”.

 Gig classification

The NITI Aayog report states that “gig workers can be broadly classified into platform and non-platform-based workers. Non-platform gig workers are generally casual wageworkers and own-account workers in the conventional sectors, working part-time or full-time.

The Periodic Labour Force Survey 2020−21 data shows that only 18.6 per cent of workers aged 15 plus had paid leave or employer-provided social security cover and written contract of more than one year. This meant that around 80 per cent of workers would need social security cover.

The CSS 2020 defines “social security” as an all-encompassing measure including all types of workers — organised or unorganised, gig or traditional, who have access to health and income security during old age, unemployment, sickness, invalidity, work injury, maternity or loss of a breadwinner etc.

There are several problems with designing social security only for platform-gig workers approach. First, non-platform gig workers are excluded. Second, it does not account for the non-linear lives that workers lead. Workers can work on two platforms simultaneously. Workers can work part-time on platforms. But that is true for non-platform workers too.

Previous work from NCAER based on the India Human Development Survey (2004-05and 2011-12) found that that workers employed in textiles and apparels were often involved in four different jobs in urban areas and six in rural areas.

Previous studies have highlighted the relatively lower social security coverage in urban areas during the pandemic and the differential factors affecting poverty.

The NCAER Business Expectations Survey of December 2021 found that 93 per cent of firms reported hiring temporary workers. 28.5 per cent of firms responded that they contributed to health insurance and 11.5 per cent said they contributed to some form of social security. 65 per cent of firms responded that they were not planning to convert any ‘permanent job’ into a temporary one in the next six months.

Basically, social security systems designed specifically for region, type of workers or time or income are likely to falter or have limited outreach. In this case, the first best solution is to design a more universal system.

In the CSS 2020 some provisions are not universal. For example, employees provident fund (EPF), employees state insurance, and gratuity are entirely for organised sector workers and unorganised workers do not enjoy such benefits.

Further, maternity benefits, which were earlier applicable to establishments hiring at least 10 workers, has not been amended.

Also, access to EPF and gratuity still has the minimum workers criterion and so even if they are universalised, still many unorganised enterprises workers will be left out of the system. This become evident from the fact that only 2.7 per cent of the 6.3 crore unincorporated enterprises in the country hired 10 or more workers (NSS Enterprise Survey 2015-16).

Social registry system

In that, first, we need a social registry system where people voluntarily sign in for social welfare. India has already done that in the form of e-Shram database. States are also designing their own social registries like Karnataka and Madhya Pradesh.

e-Shram workers, irrespective of their employment status or geography or any other criteria, should be provided with full health coverage. Health coverage needs to be in two forms — health insurance for secondary and tertiary healthcare and urban walk-in health clinics for primary healthcare. The latter should be financed by municipal funds.

The people registered on e-Shram should be given pensions. While everybody is given an inflation-indexed minimum standard pension, workers should be encouraged to contribute to pensions as they may deem fit to enhance their pensions. The existing schemes for temporary workers or any other relevant scheme/s can be merged and remodelled as deemed appropriate.

A third option could be that e-Shram workers are given unemployment benefits.

It must be ensured that there is neither double-dipping nor exclusion between systems. Unemployment insurance or re-skilling/upskilling opportunities for six months could be added as a third option too.

The last, but not the least, concern is who is going to finance this scheme. All registered companies must pay one per cent of their total annual turnover to each of these bodies — health insurance, pension and unemployment or two per cent to the overall social welfare body.

The government also contributes and so do the e-Shram registrants who are capable of paying. Contribution to these bodies in lieu of Corporate Social Responsibility funds may be made possible.

There needs to be a macro perspective to social welfare. We need to re-haul all ideas of work from a traditional employer-employee, factories/establishments approach to a more flexible one.

We need a more universal approach to social welfare, where everyone contributes to the best of their capability. We need dynamic policies which are in sync with each other. India certainly has the digital prowess to implement such a system.

Bhandari is a Professor and Sahu is an Associate Fellow at NCAER. Views expressed are personal.

In India Delhi’s Indira Gandhi International Airport can boast about being the first airport that has a “well planned, safe, smart and sustainable commercial district” adjacent to it that promotes work, play, world class cuisine, and entertainment to the travelers and socio-economic development to the airport community.

While going to and from the airport one can have a look at a well-planned boulevard with neat cross roads, pedestrian and bicycle-friendly paths for last-mile connectivity, and community without boundary walls thus allowing spaces to flow and merge with one another.

The IGIA airport has been the busiest in India since 2009 and as of 2022, it became the 7th busiest airport of the World, as per rankings by UK-based air consultancy firm, OAG. To better serve this national and international community several aeronautical as well as non-aeronautical infrastructural facilities and services were developed so that economic benefits can be reaped out of it. This gave rise to the first aerotropolis of India. Under the January 2006 agreement, the GMR-led consortium was awarded the concession to develop and operate Delhi’s Indira Gandhi International Airport for 30 years. Under this, some land was marked for undertaking commercial activities like hotels, malls, and convention centers. This later came to be called “Aerocity”.

Concept of “Aerotropolis”

The idea of Aerotropolis is credited to John D. Kasarda. However, the records mention that this concept was first presented in 1939, by New York based commercial architect Nicholas de Santis. He proposed a hypothetical airport in the city to establish an economic growth model by merging the airport with the surrounding metropolis based on time competitiveness and connection to the global economic network. According to Kasarda an urban economist and sociologist, “Airports are going to play a similar role in shaping the urban form in the 21st century just as highways did in the 20th century, railroads in the 19th century and seaports did in the 18th century.

He described Aerotropolis as a metropolitan sub-region whose infrastructure, land use, and economy are centered on an airport. According to him, a traditional metropolis was made up of a central city commercial core with its commuter-linked suburbs. However, an aerotropolis consists of a multimodal airport-based commercial core and outlying clusters of businesses and associated residential developments that feed off each other by accessibility to the airport. This 4th wave of transportation technology is based on the new dictum of “Survival of the Fastest”.

Impact of Aerotropolis on Regional Development

Many countries follow the Aerotropolis approach for developing the economy and finding solutions to unemployment and poverty in their respective countries.

Durban City which is a coastal city in South Africa’s Kwa-Zulu Natal province, implemented an aerotropolis strategy for creating growth and expansion of markets. This was achieved by creating global networks, facilitated by improved connectivity between Europe, Asia, the Middle East, and the rest of the world. Moreover, it gave rise to urbanization due to construction and infrastructural development in the areas previously called Greenfields. There has been a substantial increase in exports and imports. Due to improved connectivity, the number of businesses taking up retail and industrial spaces has increased. The provincial government predicted the creation of 750000 employment opportunities in the services and manufacturing sector.

Memphis-Shelby County Airport Authority published a report indicating a notable increase in the extent and volume of economic activity during 10 years (2005-15) because of an increase in total aircraft movement. It is due to the development of the aerotropolis, the Memphis Airport was able to establish itself as the logistics hub of America with its world-class warehouses and other accessory services.

The Incheon International Airport’s (ICN) airport city branded as “Air-City”, hosts several Grade-A office buildings, upscale retail and dining venues, 4-star and 5-star hotels, conference and exhibition centers, luxurious resorts, health and wellness complexes, golf courses and other recreational areas as well as logistics parks located in airport’s Free Trade Zone that contains cold-chain, e-commerce, and light manufacturing facilities. This generates not only substantial non-aeronautical revenue but also makes the airport a more attractive destination for business travelers, retail tourists, and affluent leisure travelers. The reason for the success of this airport city lies in its connectivity to other places. The ICN is connected through elaborate expressways, bridges, and tunnels to Seoul and nearby islands thus forming an expansive commercial and residential complex.

Thus, many cities in different parts of the world have gained tremendously by building up aerotropolis.

India’s Scenario

In the rapidly changing world, most people prefer air travel as it saves time. Many companies strategically want their offices in the vicinity of the airports so that travel time and logistic costs are reduced. Many businesses look for spaces where they can thrive, where there is easy interaction between the buyers and the sellers and footfall is more.

The airport developers understood that revenues generated from aeronautical services are limited and cannot be increased beyond a certain point. In contrast, the revenue generated from non-aeronautical services can be unlimited. This is why it is important to build infrastructure like retail shops, warehouses, hotels, malls, convention centers, etc. in and around airports.

Thus, both the consumer and supplier aspirations were answered by the development of the aerotropolis. These aerotropolis fulfilled the needs of the consumers and provided much-desired profits to the developers. Moreover, it also provided employment opportunities and finally contributed to the economic development of the area.

Thus, in the starting phase, 2 aerotropolis were conceived by the GMR-led consortium. One is located adjacent to Indira Gandhi International Airport, Delhi which is fully functional, and the other at Rajiv Gandhi International Airport, Hyderabad.

Factors Contributing to the Success of Aerocity, Delhi

But can the success of Aerocity at IGIA be attributed to airport infrastructure only or were there other factors that contributed to its success.

So, the creation of infrastructure adjacent to the airport is not sufficient rather its connectivity to other places of importance like commercial districts, places of historical importance, etc. The success of the Delhi Aerocity lies in a network of highways, metro, flyovers, etc. that connects it to different parts of India. From the aerocity, Delhi which is the National Capital Territory is easily accessible through metro or network of highways. It is well connected to Gurugram which is India’s second-largest information technology hub housing many domestic and international firm’s offices and third largest financial and banking hub. It is also home to one of India’s largest medical tourism industries. The Government of India is also finding solutions to connect IGIA with the upcoming airport at Jewar, to decongest the former.

So, it is the amalgamation of infrastructure and policy decisions that contributes to the success of an aerotropolis.

Way Forward

These Aerocities will soon transform into “Global Business Districts (GBDs)” because they provide locations with dense mixed-use development. It provides individuals and companies a platform where they can meet, exchange ideas, and innovate with the best global talents. These are not only economic multipliers but host and incubate the best of art, and culture, and offer the best of urban life. Since these districts are globally connected due to the airport as their core, they can become global powerhouses of innovation, economic boom, employment, and art & culture. Thus, giving rise to a new urban paradigm of GBDs.

Kaushik is Consultant at NCAER. Views are personal.