There are several instances of revolutionary, ground-breaking inventions throughout human civilization’s history, ranging from the first wheel to steam engines, electricity, and the internet.
However, the development of artificial intelligence (AI) is without a doubt one of the most significant, if not the most potent, technological advances in human history.
These days, AI is not a fringe technology. It has now permeated many industries and mainstream corporations, changing and revolutionizing how businesses function and produce value and profits. We need to prepare for a significant structural change.
The whole economy prepares for the AI tsunami
Nearly a year ago, when artificial intelligence (AI) was expanding quickly and there was considerable uncertainty about its potential economic impact, PwC predicted that AI might “possibly improve global economic production by up to 15 percentage points over the next decade (by 2035).”
This corresponds to an increase in global growth of about one percentage point per year. The demand on firms to reinvent themselves is at some of the “highest levels witnessed in the last 25 years across 17 out of 22 global sectors,” according to PwC study, despite the economy’s already rapid reconfiguration.
Industries will adjust to AI over the coming years in an effort to maintain it in line with human demands.IT is one of the industries most affected by AI, and there are concerns about how these industries will develop in the years to come.
The discussion has already moved from how AI will increase productivity to how it will affect human lives and the entire system of values. AI’s powers are both frightening and exciting, from composing a basic email to creating a whole website.
Microsoft AI CEO Mustafa Suleyman has issued a warning, stating that within the next 12 to 18 months, AI may replace a significant portion of white-collar professions.
Beyond this fundamental economic query, though, there is a significant problem: what would people do in a world where artificial intelligence rules?
There is no simple solution to this problem. Although there will probably be a major disturbance to the economy, it will eventually adapt to the new situation. AI should be inclusive and human-centered, according to policymakers.
In an interview with PTI, IT secretary S. Krishnan stated that AI must continue to be inclusive and human-centered, with democratic access to AI resources and a good impact on the world economy.
What implications does AI have for investors in the stock market?
Over the past several days, there has been a significant sell-off in global markets due to concerns about disruption from AI. Investors are concerned about how AI will benefit businesses, increase their productivity, and what would happen if there were a large-scale loss of jobs.
As investors become concerned that the rapid advancements in artificial intelligence may undermine pricing power, deal wins, and long-term earnings visibility for traditional software services companies, shares of major IT equities in India, such as TCS, Infosys, and Wipro, have fallen to 52-week lows.
The worry is that a significant change in the Indian IT sector will have repercussions in other industries, even though the expected collapse of the sector seems inflated.
According to media reports, the Indian information technology and business process management sector accounts for between 7 and 7.5 percent of the country’s GDP, making it one of the largest employers in India.
Due to financial strain and growing non-performing assets (NPAs) for banks and NBFCs, the majority of main industries, including banking, automobiles, housing, and insurance, will suffer greatly if AI has a negative impact on the industry and causes widespread job losses.
“India’s IT industry is a significant source of employment, FDI, and exports, accounting for 7–8% of the country’s GDP. “Cataclysmic macroeconomic impacts will result from a prolonged downturn,” stated Manoranjan Sharma, chief economist of Infomerics Ratings.
First, according to Sharma, the demand for discretionary products like cars, electronics, travel, and lifestyle services will decline as a result of employment and income losses brought on by layoffs, pay reductions, or hiring freezes.
Second, there would be less demand for homes, dropping prices, halted developments, and increased strain on banks and developers in IT hotspots like Bengaluru, Hyderabad, Pune, and Gurgaon.
Third, dwindling IT exports would increase the rupee’s pressure and the current account deficit. Fourth, considering the substantial market capitalization of IT companies, a downturn would lead to stock market instability, reduce household wealth, and discourage investment.
Sharma emphasized that as a result of multiplier effects on employment, consumption, real estate, external stability, and fiscal health, decreased business profits and incomes would ultimately result in lower tax revenues, limit public spending, and worsen the overall economic slowdown.
At this point, the market might be undervaluing the influence of AI. “There will be future times where investors feel invincible, and markets will again give them opportunities—but markets will also test them,” experts warn, indicating that it is vital for investors to remain agile.
This is merely a stage. “Things will get better in the next one to two quarters,” stated Ajit Mishra, SVP of Research at Religare Broking.
Some analysts are still upbeat about the IT industry, saying that it is overly hopeful that it will collapse right away. The harm may be minimal if Indian businesses are able to adjust to these developments and concentrate on leveraging AI to boost productivity.
According to V.K. Vijayakumar, chief investment strategist at Geojit Investments, Indian IT companies have a history of overcoming obstacles and adjusting to change.
