On 13 November 2024, Michael Debabrata Patra, Deputy Governor of the Reserve Bank of India, delivered an influential inaugural address at the DEPR Conference in Jaipur. His speech, titled “Digital Technology, Productivity, and Economic Growth in India,” explored how digitalisation, artificial intelligence, and virtual digital currencies are shaping economies, improving productivity, and unlocking transformative growth opportunities for India and other emerging markets.
Michael Debabrata Patra discussed the transformative role of artificial intelligence, robotics, and virtual digital currencies, equating their potential to historic technological revolutions like steam power and personal computing. Generative artificial intelligence alone is projected to contribute between seven and ten trillion US dollars to global GDP within the next three years. In India, digital technologies currently account for ten per cent of GDP and are expected to grow to twenty per cent by 2026. This puts India at the forefront of a global digital revolution, making it a critical player in leveraging technology for economic advancement.
Michael Debabrata Patra also underlined the role artificial intelligence plays in enhancing productivity and creating new economic opportunities. Forecasts suggest that generative artificial intelligence could contribute between three hundred and fifty-nine billion and four hundred and thirty-eight billion US dollars to India’s GDP by 2029-30. Indian firms have rapidly adopted artificial intelligence, with twenty-five per cent now integrating it into production processes, a sharp rise from eight per cent in 2023. However, the resource-intensive nature of artificial intelligence implementation, coupled with ethical concerns and the risks of cyber threats and data breaches, poses significant challenges that require responsible governance and robust policies.
The Reserve Bank of India has been proactive in exploring virtual digital currencies, with pilots for a Central Bank Digital Currency currently underway. These digital currencies are expected to enhance transparency, reduce transaction costs, and promote financial inclusion, particularly for underserved populations. At the international level, collaborations such as Project Nexus and mBridge aim to link the digital finance infrastructures of different nations, highlighting the global significance of these innovations. Michael Debabrata Patra stressed the importance of balancing innovation with risk mitigation to ensure the stability and security of financial systems.
Michael Debabrata Patra addressed the relationship between digitalisation and productivity growth, noting that while technological advances are apparent, their measurable impact on global productivity statistics has been limited. This phenomenon, often referred to as the “Solow Paradox,” is partly due to the challenges of integrating technology into existing economic structures. In India, platforms such as the Unified Payments Interface and Account Aggregators have demonstrated measurable productivity gains, including reductions in customer acquisition costs and improvements in service efficiency. Despite these advances, the productivity slowdown in information and communication technology sectors globally highlights the need for renewed focus on innovation and efficiency.
India’s digital public infrastructure has emerged as a global model. Initiatives like Aadhaar and the Unified Payments Interface have transformed financial inclusion and public service delivery, while platforms such as the Open Network for Digital Commerce and the Trade Receivables Discounting System are bridging credit gaps for micro, small, and medium enterprises. Direct Benefit Transfers have streamlined government welfare schemes, saving the exchequer an estimated three and a half lakh crore rupees since their inception. These successes demonstrate India’s unique position in harnessing digitalisation for equitable and inclusive growth.
While digitalisation offers immense potential, it also brings risks, including data breaches, cyber threats, and disruptions to traditional labour markets. Michael Debabrata Patra emphasised the importance of robust legislation and ethical frameworks to address these challenges. Complementary policies are essential for maximising the benefits of digitalisation, including initiatives to upskill the workforce, foster competition, and ensure the efficient reallocation of resources. The Reserve Bank of India has aligned its digital strategy with these goals, prioritising financial inclusion, digital public infrastructure, customer protection, cybersecurity, and sustainable finance.
Michael Debabrata Patra concluded by elaborating on the transformative potential of digital technologies, including artificial intelligence and virtual digital currencies, in driving economic growth and productivity. He urged policymakers, businesses, and other stakeholders to balance innovation with risk management, emphasising that strong institutions and effective policies are crucial for harnessing these technologies for long-term benefits. Quoting Paul Krugman, he reminded the audience that “Productivity is not everything, but in the long run, it is almost everything.”
(Source: https://rbidocs.rbi.org.in/rdocs/Speeches/PDFs/UNGMDP131124128013267DE84DC2A85B632FA6BEE493.PDF, https://www.rbi.org.in/Scripts/BS_SpeechesView.aspx?Id=1477)
