AI’s Growth Paradox

The AI seems to have become a dominant force today, influencing economies, societies, and the daily lives of people across the world. The reason lies in its unique ability to process vast amounts of data, automate tasks, predict outcomes, and scale innovations far faster than humans can. Projections indicate that AI could add up to USD 13 trillion to the global economy by 2030. Unsurprisingly, an investment frenzy has followed.

Mega tech companies in the US, such as Nvidia, Microsoft, Meta, and Alphabet, have pumped trillions of dollars into the sector, spanning data centres, hardware such as GPUs, and energy infrastructure. Some of the most reputed and high-profile tech firms, including OpenAI and Anthropic, are reportedly considering IPOs that could value them at hundreds of billions. Elon Musk’s rocket company, SpaceX, has reportedly interviewed banks to lead an IPO (New York Times, January 14). These listings are expected to create a massive bonanza for Wall Street and Silicon Valley, with investment banks standing to gain hundreds of millions by facilitating them. According to Ben Horowitz of Andreessen Horowitz, the current boom is bigger than the internet era, driven by unprecedented customer adoption and revenue growth rates never seen before.

India is not far behind in fuelling this boom, supported by its vast talent pool, expanding digital economy, and growing focus on strategic sovereign AI capabilities—presumably an effort to diversify away from over-dependence on China and the US. A surge in AI investments is visible, with global tech giants and domestic conglomerates focusing on data centres, cloud infrastructure, AI hubs, and large-scale skilling programmes to enable population-scale AI adoption. Microsoft has committed USD 17.5 billion between 2026 and 2029, Amazon USD 35 billion by 2030, and Google USD 15 billion between 2026 and 2030. The Indian AI market is projected to reach USD 20–22 billion by 2027, growing at a CAGR of 30 per cent (Bloomberg, December 10, 2026). The government has also allocated more than USD 1 billion for an AI mission to provide subsidised compute, support sovereign AI models, and expand skilling, even as major conglomerates such as Tata and Reliance have announced plans to build data centres costing billions.

However, scepticism surrounds the boom, with rapidly rising valuations viewed as potential signs of a looming bubble, often attributed to inflationary pressures lurking beneath the investment surge. A study by MIT found that 95 per cent of organisations that invested in generative AI saw their stocks subsequently plummet. Experts, however, remain divided. Of 40 tech leaders surveyed by CNBC, some see a bubble forming, while others believe the boom is real and driven by strong fundamentals. According to Invesco’s chief global market strategist, Brian Levitt, investment booms have historically followed transformative technological breakthroughs, as seen with railroads, electricity, and the internet. Ultimately, the test lies in fundamentals. Today’s AI giants have lower debt-to-earnings ratios than companies such as WorldCom Inc. did during the dot-com era, and firms like Nvidia and Meta Platforms are already reporting strong profit growth from AI (Fortune, 4 January 2026).

The truth is that AI is here to stay, but its promises of transformation are riddled with contradictions—ranging from job displacement versus productivity gains, to rising energy demand versus youth-driven adoption. Goldman Sachs estimates that AI could automate tasks equivalent to 300 million full-time jobs globally, affecting nearly a quarter of all work in the US and Europe. Entry-level white-collar roles in law, consulting, finance, coding, and call centres face particularly high risk, with youth employment in AI-exposed occupations already down by 13 per cent since the release of ChatGPT.

On productivity, however, evidence remains strong. An MIT Sloan study found that organisations adopting AI consistently outperformed comparable firms that did not, both in productivity and market performance. Misinformation and disinformation—identified as top global risks for 2025 in the World Economic Forum’s Global Risks Report 2025—also demand urgent attention to safeguard authentic, transparent, and accurate media ecosystems. Meanwhile, AI’s energy footprint poses another challenge. According to the International Energy Agency, data centres globally consumed around 415 TWh of electricity in 2024, a figure expected to more than double by 2030. Proponents argue that AI can function as a layer of system intelligence, improving renewable energy forecasting, grid balancing, and predictive maintenance, paving the way for more adaptive, resilient, and equitable energy systems—an emphasis reinforced at COP30.

The chief concern surrounding AI adoption remains the prospect of large-scale job losses, particularly in the short run, which could trigger social and political unrest, especially in developing economies. AI is rapidly reshaping the workforce across sectors through automation, affecting both high-skill cognitive roles in the formal sector and routine low-skill jobs in the informal economy. Analysts believe that 50 per cent to 80 per cent of jobs could be affected by 2030 in fields such as technology and computing, finance and accounting, retail and customer service, education, healthcare, transportation, and manufacturing. Even traditionally insulated professional domains—including administration, office management, media, and creative industries—are likely to be impacted, leaving limited space for purely human cognitive labour.

For a political economy like India, where employment generation already poses a challenge, such a massive AI-driven transformation—while promising long-term gains—could become an immediate imbroglio. The juggernaut of AI cannot be tamed by governments alone, as it is a global phenomenon driven by powerful economic forces. How individual economies manage this “new normal” will vary significantly. A World Economic Forum study of 1,000 employers concludes that analytical thinking, resilience, flexibility, and agility are essential to navigate the transition. The study reveals that while half of the employers plan to reorient their businesses in response to AI, nearly two-thirds intend to hire talent with specific AI skills, and 40 per cent anticipate workforce reductions where automation is feasible.

According to NITI Aayog, two scenarios could unfold for India’s tech sector by 2031. In the absence of upskilling, employment could fall from 7.5–8 million jobs in 2023 to 6 million, implying a net loss of 1.5–2 million jobs. With aggressive upskilling and corrective measures, however, employment could rise to 10 million, adding 4 million new roles. The latter scenario appears more plausible, as AI increasingly favours skilled labour.

The AI boom is real and promises exponential economic growth alongside improvements in quality of life across sectors. New employment opportunities are emerging in AI literacy, data analysis, and human-centric skills such as creativity and emotional intelligence. Globally, it is estimated that while 170 million new roles will be created and 92 million old roles displaced, there will be a net gain of 78 million jobs between 2025 and 2030. As Mustafa Kemal Atatürk, the founder of modern Turkey, famously said, “Civilization is a fire that consumes those who ignore it.” AI represents one of the finest achievements of human civilisation to date. Ensuring that adaptation is not only rapid but also equitable is imperative, so that labour markets remain inclusive and the transition remains just and smooth. At the same time, the creation of robust safety nets, retraining programmes, and strict adherence to ethical standards remains equally vital.

Views expressed are personal. The writer is a former Additional Chief Secretary of Chhattisgarh