India is on the cusp of a generative AI (Gen AI) revolution that could reshape industries, drive digital innovation, and contribute up to $1.5 trillion to the nation’s GDP by 2030, according to EY’s report The AIdea of India, released on January 14. The country’s strengths, including its digital infrastructure and skilled workforce, position it to lead globally in AI adoption.

India’s digital ecosystem, supported by platforms such as Aadhaar, UPI, and India Stack, is a solid foundation for scaling AI applications. The nation is the second-largest global producer of digital data, a crucial resource for AI model training. India’s large population and growing economy also offer an ideal environment for testing AI innovations.

Neha Sharma, Partner at EY India, highlighted the ongoing discourse on AI’s impact on jobs, referencing public figures like Elon Musk and Bill Gates. EY’s analysis of over 10,000 tasks across sectors reveals that 42% of these tasks can be augmented by AI, and 24% may be fully automated in the next three to five years.

India’s vast STEM talent pool and thriving start-up ecosystem are seen as key drivers of AI adoption. The report anticipates that generative AI will contribute $359-438 billion to India’s GDP in 2029-30, adding up to 1.1% to annual growth. Over the next seven years, the technology could contribute between $1.2 trillion and $1.5 trillion to the economy, making it a major growth engine for India.

Key sectors likely to see the most significant economic impact from Gen AI include business services, financial services, healthcare, retail, education, and transportation. These sectors are expected to account for nearly 70% of AI’s economic contributions.

However, challenges remain in fully capitalizing on Gen AI’s potential. Issues such as talent shortages, limited access to structured data (especially in local languages), high infrastructure costs, and regulatory uncertainty could impede progress.

To overcome these hurdles, the report suggests several policy measures, including developing indigenous datasets, building AI infrastructure, investing in domestic AI chip manufacturing, creating Centers of Excellence for AI talent, and implementing a clear regulatory framework.

A proactive strategy could place India at the forefront of global AI innovation, with its entrepreneurial ecosystem and focus on AI as a public good giving it a competitive edge. By addressing challenges and fostering collaboration between the government, private sector, and academia, India has the potential to not only leverage Gen AI for domestic growth but also emerge as a global hub for AI development.