Franziska Ohnsorge of the World Bank claims that trade agreements might lead to a manufacturing renaissance, while AI adoption is already increasing services exports.
Franziska Ohnsorge, the top economist for South Asia at the World Bank, said on October 4 that India is well-positioned to benefit greatly from artificial intelligence (AI), which might also bring back private investment.
“India is in a good position to gain from AI. The adoption of it is accelerating. As a result, individuals are figuring out how to use it, and investment will follow. In an interview with the media, Ohnsorge said, “I do not know whether it is substantial enough to alter the macroeconomic figures.”
Rapid Adoption and AI Readiness
Ohnsorge emphasized that India’s AI readiness rating is “almost advanced economy level, significantly higher than other emerging markets and developing countries.” The BPO industry has seen the strongest adoption; since ChatGPT’s launch, job listings needing AI capabilities have increased, accounting for 12% of all ads, which is almost three times more than in other industries.
The export of services is a sign of this trend. “While total service exports have recently plateaued, computer services exports have increased by 30% since the launch of ChatGPT,” she said.
Despite slowing down, private investment is still stronger than its peers.
While private investment has increased in other developing nations after the epidemic, it has stagnated in India. On the other hand, public investment has increased. Ohnsorge pointed out that “private investment growth in India remained greater than in other emerging and developing nations” notwithstanding the decline.
By global standards, she said, foreign direct investment (FDI) is weaker.
Trade Agreements and Production Opportunities
Ohnsorge said that new trade agreements and tariff reductions might spur a manufacturing drive in addition to services. With their trade partners, Mexico and Vietnam have access to markets worth around half of their GDP. It represents 12% of India’s GDP. The UK deal, the EU, Australia, Canada, and maybe the US will increase India’s market access to 50% of GDP.
She referred to the UK trade deal as “the most ambitious in a decade,” pointing out that it addresses labor mobility and services in addition to tariffs. “With these trade agreements, certain trading partners may become more accessible, even if one becomes less accessible,” she said.
A Potential Development
Together with changes in the products sector and liberalization of the factor market, the economist said that AI-driven services exports may lead to a structural breakthrough.
“I believe there might be a breakthrough if you had technology that was driving the services export side, or the services sector in general, and you had completed a trade deal on the products side. Additionally, I believe that factor market changes and the deregulation commission might have a significant impact,” she remarked.
On October 7, the World Bank will publish its report on South Asia. India’s growth prediction was 6.5% for FY26 and 6.7% for the next fiscal year, according to its June outlook.