MUMBAI: The country has everything going for it in its bid to reap the maximum benefits from fast-evolving technologies such as generative AI, which can unlock new growth avenues and optimise existing ones with the digital public infrastructure, Reserve Bank deputy governor Michael Patra has said.
Forecasts suggest that generative AI is projected to boost global GDP by $7-10 trillion over the next three years. Large language models alone are expected to enhance worker productivity by 8 to 36 percent, he added.
“We are uniquely positioned to unlock new growth avenues and optimise existing ones with our digital public infrastructure (DPI), a vibrant information technology sector and a burgeoning youth population, including one of the largest AI talent bases. Various forecasts suggest that the generative AI will contribute a hefty $359-438 billion to the national GDP by FY30,” Patra said.
Domestic companies’ integration of AI into production processes has increased from 8 percent in 2023 to 25 percent in 2024, Patra told a conference on ‘digital technology, productivity and economic growth in Jaipur on Wednesday.
He said micro-level evidence from surveys of our banks shows that while all of them have implemented mobile and internet banking, 75 percent offer online account opening, digital KYC, and digitally enabled doorstep banking. Additionally, 60 percent provide digital lending, 50 percent offer payment aggregator services, 41 percent use chatbots, 24 percent have adopted open banking, and 10 percent have integrated internet of things (IoT) technology.
Noting that private sector banks are leading the technology adoption drive, the deputy governor, who is set to hang up his boots after three decades with the central bank in January, emphasised that complementary policies would play a key role in unlocking new growth energies by reaping the productivity gains offered by digital technologies and called for policy priorities, towards promoting competition to reduce market concentration, and efficient resource reallocation.
Productivity patterns are increasingly being shaped by the expanding role of digital services and intangible capital, driven by rising business investment in digital technologies, Patra said, adding prices of digital assets, including ICT, continue to decline, enabling businesses to operate more efficiently and deliver competitive products and services.
He further said the KLEMS (capital, labour, energy, materials and service) framework is valuable for capturing the impact of digitalisation by measuring its contributions to labour quality, capital quality, value added and total factor productivity. This framework requires breaking down the aggregated capital and labour into ICT capital, human capital, and complementary investments that incorporate digital assets as production inputs. However, this disaggregation can be challenging, particularly due to gaps in comprehensive data.
Giving an example, the deputy governor noted that RBI-run TReDS platform has addressed the credit gap of MSMEs estimated at around Rs 52.2 trillion by connecting them with banks and clients, with a reduction in funding costs up to 2.5 percentage points. This is clear from the value of invoices financed through this platform has surged 23 times.
“The value of invoices financed through the invoice discounting platform TReDS has surged more than 23 times since its launch in 2017,” Patra said.
To encourage more buyers (all business and central public sector enterprises) on TReDS and further address the working capital issue faced by MSMEs, the government last week had notified the reduction in turnover criterion for buyers to onboard the platform from Rs 500 crore earlier to Rs 250 crore.
From FY20 to FY24, invoice financing on TReDS jumped 766 percent from 4.8 lakh invoices financed in FY20, while the amount unlocked for MSMEs through these invoices grew by 1138 percent from Rs 11,165 crore in FY20, according to government data.
Patra also said around 5,000 active fintech companies are involved as of October 2024 in providing various financial and technical solutions to businesses, including MSMEs, helping businesses to better manage their operations and improve supply chain finance.