Artificial Intelligence for Sustainable Growth and Social Welfare in Emerging Economies: Empirical Evidence from India and Policy Implications

Abstract

Artificial intelligence (AI) is reshaping production, employment, financial services, and welfare, but its implications for inclusive growth in emerging economies remain uncertain. This study examines the emerging economic and social effects of AI adoption in India through a structured synthesis of recent academic, government, regulatory, and industry evidence. The analysis develops a conceptual framework linking AI inputs and diffusion mechanisms with productivity, distributional, and welfare outcomes, while considering institutional and governance capacity as a moderating factor. The evidence indicates substantial AI potential alongside uneven diffusion. India's AI policy architecture includes an IndiaAI Mission with an outlay exceeding ₹10,300 crore, while national estimates project a potential AI contribution of USD 500–600 billion to GDP by 2030. However, AI adoption remains considerably lower among MSMEs than among global enterprises, while routine and language-intensive tasks in sectors such as IT and business-process outsourcing face substantial automation exposure. AI-enabled financial infrastructure, including the Unified Lending Interface, shows emerging potential for improving access to formal credit among underserved groups, although its welfare effects remain preliminary. These patterns indicate a second-order digital divide, in which access to digital technologies has expanded but the capacity to convert AI into productive and inclusive outcomes remains uneven. The study concludes that inclusive AI-led growth requires complementary investment in skills, MSME capabilities, worker-transition support, and adaptive institutional governance alongside technological infrastructure.