New Delhi: Almost 60% of Indian companies are using some form of artificial intelligence (AI), which is higher than the global average. However, many face challenges like a lack of skilled workers and integration issues, according to the IMF’s 2025 Article IV report.
India has shown impressive productivity growth over the past two decades. This growth comes from a boom in high-value services and improvements in efficiency. However, there are still obstacles to overcome. The IMF suggests that by removing barriers to innovation, India could boost productivity growth by nearly 40%. This increase could be equivalent to adding the output of Karnataka, India’s fourth-largest state, to the economy every decade.
While the services sector has thrived, manufacturing and agriculture have lagged. A typical worker in services produces over four times more than a worker in agriculture with the same education. This difference highlights the potential gains from shifting focus to more productive sectors.
The IMF points out that India has a large number of very small firms. Around 75% of factories have fewer than five workers, which is nearly double the share in the U.S. These small enterprises often produce significantly less output. The challenges they face, like complex regulations and labor laws, keep them from growing and increasing productivity. New labor codes in India aim to simplify this process and encourage business growth.
Moreover, the report notes that business innovation in India is limited. It states that spending on research and development is below the average for emerging economies. Larger firms tend to innovate more, while smaller companies struggle with barriers to growth. If India can improve its innovation landscape, it could lead to substantial productivity gains.
AI has the potential to enhance productivity as well. With its current adoption rate, the IMF believes that AI could significantly improve productivity in sectors across Asia, including India. AI might raise total productivity by anywhere from 0.3 to 3 percentage points over the next decade, depending on various factors.
Furthermore, experts suggest that addressing skill shortages and integration challenges is crucial. Investing in digital infrastructure, providing training, and creating safety nets for workers at risk of job loss will help maximize the benefits of AI without widening existing inequalities.
India has already made significant strides in establishing a digital public infrastructure that supports growth. Unlocking further progress will require coordinated action. This means simplifying regulations, boosting innovation, and allowing labor to transition to higher-productivity jobs. With the right moves, India can turn its strengths into lasting productivity gains, moving closer to its goal of becoming an advanced economy.
In a social media reaction, users have expressed optimism about AI’s role in India’s economic future but remain cautious about the skills gap and how it might impact jobs. As the debate continues online, it’s clear that the conversation around AI and productivity is just beginning.
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AI, 2025 ARTICLE IV REPORT, INTERNATIONAL MONETARY FUND, IMF, NEARLY 60 PER CENT OF INDIAN FIRMS ALREADY USE SOME FORM OF AI
