AI, Work and the Democratic Bargain

Executive summary

Executive summary

Artificial intelligence is neither simply a threat to employment nor a guaranteed engine of prosperity; its consequences depend on how it is developed, deployed and governed. For India, the central risk is productivity without labour absorption: firms becoming more efficient while the economy becomes less capable of bringing young people into stable work, teaching them professional judgment and creating credible routes into the middle class.

The IMF estimates that roughly 60 per cent of employment in advanced economies is exposed to AI; among the major emerging markets it profiles, India’s high-exposure share, at about 26 per cent, is the lowest.¹ But exposure is different from vulnerability. Advanced economies have older populations, greater fiscal capacity, deeper welfare systems and control over the firms driving the transition; India has a younger workforce in need of jobs, an overwhelmingly informal labour market, thin transition institutions and a growth path unusually dependent on services exports and entry-level professional employment. The argument is thus that a targeted shock could carry greater impact, because it strikes precisely the pathways on which India depends for labour absorption and social mobility.

The deeper risk is not to particular firms or workers but to the development model itself. India's path into the middle class has run through a narrow channel – services exports and entry-level cognitive work – and that is the channel AI compresses first. For a young, labour-surplus democracy, a shock to the pathway of mobility is not a sectoral problem but a systemic one.

The disruption operates through three channels and timelines. The contraction of entry-level cognitive work is underway: generative systems now produce the drafts, code and analysis previously assigned to juniors, thinning both hiring and the apprenticeship pipeline through which judgment is formed. The export-demand channel is gathering pace – the work need not move to a cheaper country when it can move in-house to the model. And the channel running through physical and informal work operates on two clocks: algorithmic management of platform work is already pervasive; physical replacement remains distant in India, but the harvesting of the data that will train it has begun on Indian factory floors.

The same capabilities offer gains India must capitalise on: wider access to scarce expertise and lower organisational costs for small firms and individual entrepreneurs. Upside and downside run through the same mechanisms; the task is to shape the terms of adoption.

India is alive to the potential of AI to reshape its economy and its governance, and a range of institutions and initiatives has grown up around it. This is welcome, but two things are missing: sustained attention to what AI is doing to work, and democratic representation in how the transition is governed, anchored in a dedicated parliamentary body.

This paper proposes three foundations for that response: seeing the transition clearly; rebuilding the pathway into work and protecting existing workers; and governing the transition democratically – supported by measures to spread adoption and to carry the argument outward through a Global South compact.

¹ International Monetary Fund, Staff Discussion Note SDN/2024/001, M. Cazzaniga et al., “Gen-AI: Artificial Intelligence and the Future of Work,” 14 January 2024. https://www.imf.org/en/Publications/Staff-Discussion-Notes/Issues/2024/01/14/Gen-AI-Artificial-Intelligence-and-the-Future-of-Work-542379

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