India’s NITI Aayog, the central public policy think tank of the government, said that artificial intelligence (AI) stands out as a key driver for achieving the goal of Viksit Bharat (self-reliant India) and sustaining an annual economic growth rate of 8%. NITI Aayog added that the world’s fastest-growing major economy could unlock an additional $500–600 billion in gross domestic product (GDP) by 2035, surpassing its current growth path.
In its latest report, the think tank’s assessment shows that the manufacturing and financial services sectors would be most influenced and may have as much as 20-25% of their sectoral GDP credited to AI by 2035.
“If India is to accelerate its growth to the 8% annual rate required for the realization of Viksit Bharat, we have no option but to significantly raise productivity across the economy and unlock new growth through innovation. Artificial Intelligence can be the decisive lever,” BVR Subrahmanyam, the chief executive of NITI Aayog, said in the report.
“With a focused and sector-specific approach, industries such as banking and manufacturing can deploy Al today to
improve efficiency, service quality, and competitiveness creating momentum for deeper transformation. At the same time,
India must nurture frontier innovation, from Al-enabled drug discovery to software-defined vehicles, building the next engines of growth,” Subrahmanyam added.
NITI Aayog, in its report, pointed out two key AI-driven accelerators. First, extensive integration of AI across economic
sectors can significantly improve productivity and workflow optimization, addressing as much as 30–35% of the required growth gap. Second, redesigning research and development (R&D) through generative AI would allow
India to move forward in global innovation, contributing an additional 20–30% of the essential improvement.
Moreover, sectors like manufacturing and banking can deploy AI immediately to improve service quality, enhance workflows, and elevate international competitiveness, thereby influencing a broader transformation. At the same time, the report stated that India needs to invest in various innovations, from AI-facilitated drug discovery to intelligent, software-enabled vehicles, to develop the next high-growth industries.
This extensive evaluation, commissioned by NITI Aayog, reinforces the potential of AI in raising India’s economic growth
path. The study covered over 850 occupations across 16 sectors and reviewed over 2,100 distinct work activities to
discern AI’s impact on efficiency and performance.
“The analysis highlights two major Al unlocks. First, accelerating adoption of Al across industries to enhance productivity and efficiency-bridging nearly 30-35% of the required step-up. Second, transforming R&D, especially through generative Al, which can enable India to leapfrog into innovation-driven global opportunities, contributing at least 20-30% of the required uplift,” Subrahmanyam stated.
India poised to capture 10-15% of AI-driven global growth
According to the report, AI will likely contribute about $17–26 trillion to the global economy over the next decade. India, with its vast engineering and software talent pool, as well as a rapidly progressing R&D landscape and elevating digital infrastructure, is uniquely positioned to capture a significant share of this growth, possibly acquiring 10–15% of the global AI value.
At a 5.7% annual economic growth pace, India’s GDP is expected to touch $6.6 trillion by 2035. However, if the nation speeds up the government’s vision of Viksit Bharat and targets an 8% annual growth rate, the country’s GDP could touch $8.3 trillion—a gap of $1.7 trillion—which can be achieved through planned investment in AI adoption.
“AI remains in its formative stage, and market structures are still evolving. To secure a leading position globally, India could consider investing in sovereign infrastructure, including energy, to build resilience and unlock higher value-creation potential,” the report said.
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‘Data capital of the world’
Data is rapidly becoming the new currency in the digital economy, powering innovation, pushing up enterprise value, and establishing global economic competitiveness. With its expanding digital infrastructure and rich diversity, India is advantageously placed to lead the global data revolution, NITI Aayog stated.
The report identified several key actions to accelerate this transformation. These include establishing a resilient framework for anonymized public data collection, led by institutions like the India Data Management Office (IDMO) and the National Data Access Platform, to make sure data use is both secure and ethical. Under the National Data Governance Framework, the world’s most populous country could also create a certified marketplace for non-personal data, merging privacy safeguards and quality certifications.
“Focusing on AI enablers across the manufacturing, financial services, pharmaceuticals, and automotive industries—which represent roughly 25% of India’s projected 2035 GDP—can help translate AI adoption into measurable outcomes by supporting innovation, improving productivity, and enhancing export potential,” the report pointed out.
NITI Aayog recommended that the country develop sector-specific data platforms, like open access to diverse, cross-industry data sources, with standardized frameworks and borrower consent protections for financial services. For the pharmaceuticals industry, NITI Aayog’s report suggested putting together a unified omics dataset by sequencing over 10 million genomes by 2035, which would drive AI-powered breakthroughs in drug discovery.
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AI-driven gains could add $50–55B value to banking sector
AI is set to transform the entire banking and financial services sector, integrating intelligence into every product, process, and customer interaction, thereby reducing operational costs and driving broader financial inclusion by making services more personalized and accessible.
According to the report, AI-driven productivity and efficiency gains could contribute an additional $50–55 billion in value by 2035, over and above the banking sector’s current growth projections, provided the financial services sector rapidly evolves into bionic institutions that fuse the analytical power of AI with human insight.
Among its benefits, AI’s wide adoption in the financial services and banking sector would automate compliance, detect fraud, and improve risk governance with the use of advanced fraud detection and privacy-protecting technologies like federated learning and secure multi-party computation. AI-driven tools can also improve credit assessments, maximize collections, and upgrade portfolio administration. Moreover, AI-powered virtual assistants can act as digital relationship managers, delivering personalized financial advice and instant product recommendations.
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Legacy tech may delay AI gains in India’s banking sector
While AI’s ability to transform India’s banking sector is impressive, NITI Aayog’s report also points out a major challenge. Several lenders continue to use obsolete technology infrastructure and rely on monolithic core systems not designed to efficiently incorporate AI tools.
The challenge is primarily because integrating advanced AI into these legacy tech platforms involves expensive transformations or even complete system replacements. These efforts can also take several years to complete and simply push back the realization of AI-driven productivity gains.
At the same time, smaller banks and financial technology (fintechs) firms are particularly sensitive since many lack access to high-performance computing infrastructure, AI-ready platforms, or shared utility agents. This creates a widening digital divide within the banking and financial sector, where only large, financially strong institutions can fully benefit from AI capabilities, while others struggle to stay aligned.
Moreover, efforts to improve data availability through initiatives like the Account Aggregator (AA) framework and the Data Empowerment and Protection Architecture (DEPA) face major limitations as large segments of the Indian population live in rural and digitally underserved regions and remain excluded from the digital data ecosystem.
In the absence of proper government frameworks and guardrails, AI-powered decisions can lead to errors, regulatory violations, or even breach of customer trust, which would be detrimental to both financial system stability as well as institutional credibility.
The NITI Aayog report suggested that in order to capitalize on AI’s potential in the banking sector, India needs to quickly upgrade its core banking infrastructure, set up a unified AI ecosystem, promote equal access to computing resources, and deepen the digital data foundation. At the same time, India needs to introduce strong regulatory oversight, clear role definitions, and extensive personnel training to ensure safe and effective AI deployment.
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AI to boost manufacturing economy by $85-100B by 2035
In the manufacturing sector, NITI Aayog’s report stated that AI-powered productivity improvements, predictive maintenance, and intelligent product design could add an estimated $85-100 billion to the economy by 2035.
However, realizing these benefits at full capacity requires more than just deploying technology. An important step is to train and upskill India’s industrial workforce in AI applications and ensure the staff is qualified enough to operate in AI-driven settings.
But again, skills alone are not adequate. NITI Aayog’s report pointed out that it is essential to develop AI-integrated supply chains that include digitally-enabled micro, small, and medium enterprises (MSMEs), allowing access to raw materials, technologies, and components. India also needs to raise domestic demand, which calls for compatible trade policies in order to turn efficiency into a true market advantage.
At the same time, critical roadblocks threaten to slow down this transformation. For instance, India currently lacks an adequate workforce with versatile skills in AI and core manufacturing areas, including robotics and chip design. While several upskilling programs exist, they remain too limited and incompatible with the practical needs of factories.
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AI can cut drug costs, raise India’s global health role
According to the NITI Aayog report, AI has the potential to radically reduce both the cost and duration of drug development, presenting a strategic plan for India to move beyond generics and establish itself as a global hub for healthcare innovation within the next decade.
Currently, about 80% of the domestic pharmaceuticals market is dominated by generic drugs. Traditional drug discovery is not only time-consuming, but also expensive, with costs often reaching $1–2 billion per molecule and timeframes spanning over 10 years.
However, AI could reduce drug development expenses by 20–30% through automated advanced research, drug repositioning, and virtual control groups in clinical trials, replacing real-world placebo participants with AI-generated simulations, the report stated.
But India faces infrastructure bottlenecks. Advanced AI in drug discovery is heavily dependent on high-performance computing (HPC) infrastructure, and the country faces a significant shortage of Graphics Processing Unit (GPU) availability, with lead times of over 70 weeks and funding constraints. Export and trade restrictions, as well as global power struggles, further pose a threat to timely deployment, potentially stalling progress by 18–24 months.
The report pointed out that in the absence of adequate computing capacity, immediate investment in regulatory reform, and genomic data infrastructure, India’s ability to become a leader in AI-driven pharmaceutical innovation may be limited. As a result, the country may miss out on its ability to shape the future of medicine, global competitiveness, and safe healthcare sovereignty.
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Watch: AI is a double-edged sword
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Source: https://coingeek.com/ai-key-to-achieving-8-economic-growth-india-niti-aayog/
