Recently, the Reserve Bank of India (RBI) made an important prediction at the conference on digital technology, productivity, and economic growth, stating that generative artificial intelligence (Gen AI) is expected to contribute up to $438 billion to India's Gross Domestic Product (GDP) between 2029 and 2030. Meanwhile, in 2024, the proportion of Indian companies integrating artificial intelligence into their production processes has increased from 8% in 2023 to 25%.
Image Source Note: Image generated by AI, image authorized by service provider Midjourney
Michael Debabrata Patra, Deputy Governor of the Reserve Bank of India, pointed out that India is currently committed to investing ₹1.25 trillion to develop its semiconductor industry. Based on recent growth trends, it is expected that by 2026, the digital economy will account for one-fifth of India's GDP, currently making up about one-tenth. He stated that India has a rich talent pool in the field of artificial intelligence, along with unique advantages to further explore and optimize growth opportunities through digital public infrastructure, a thriving information technology sector, and a young population.
He also mentioned that India is at the forefront of the digital revolution in the fintech sector, with the rapid development of digital payments driving this process. However, the emergence of new technologies has also brought many challenges, such as disruptions to traditional technologies and the labor market, high demand for resources, as well as potential cybersecurity threats and data privacy issues.
When discussing how digitalization is driving the development of India's financial sector, Patra provided micro-level evidence showing that all Indian banks have implemented mobile and internet banking, with 75% of banks offering online account opening and digital KYC services, 60% providing digital loans, 50% offering payment aggregation services, and 41% using chatbots. Digitalization has significantly improved productivity in the banking sector.
He also noted that the Unified Payments Interface (UPI), launched in 2016, is an important milestone, achieving 16.6 billion transactions in October, with the successful instant debit withdrawal rate rising from 77% last year to 86%. Additionally, the concept of embedded finance is rapidly developing, with the global market estimated to reach $66.8 billion in 2022, and projected to grow at an average annual rate of 25.4% between 2023 and 2032.
Approximately 40% of India's rural population and 78% of internet users aged 20-30 are increasingly engaging in online consumption. As more households make online purchases, Indian fintech companies are providing various technological solutions to small and medium-sized enterprises to help optimize their operations. Finally, Patra mentioned that India is also collaborating with international organizations to explore the connectivity of open financial API frameworks in different countries, promoting a balance between risk management and financial innovation.
Key Points:
🌐 Generative artificial intelligence is expected to contribute up to $438 billion to India's GDP between 2029 and 2030, with corporate AI integration increasing to 25%.
💳 Digital financial services in India are becoming increasingly popular, with 75% of banks implementing online account opening and digital KYC, and a significant increase in UPI transactions.
📈 The embedded finance market is rapidly growing, with a market size of $66.8 billion in 2022, projected to grow at an average annual rate of 25.4% over the next decade.
