Artificial Intelligence (AI) is significantly transforming India’s economy and workforce. In sectors like services, healthcare, industry, and finance, AI enhances efficiency, improves services, and reshapes customer experiences. The Economic Survey 2023-24 highlights that while AI’s impact varies across sectors, the manufacturing industry remains less affected due to the current limitations of industrial robots compared to human labor.

However, AI’s integration poses challenges to traditional sectors. A significant concern is the shortage of skilled professionals in AI, which hampers innovation and the deployment of AI solutions across various industries. Additionally, the need for diverse and high-quality datasets, especially for Indian languages, presents a barrier to developing robust indigenous AI applications.

To mitigate AI’s impact on livelihoods, several measures can be implemented:

1. Skill Development: Investing in education and training programs to upskill the workforce in AI and related technologies can bridge the talent gap and prepare individuals for new roles emerging from AI advancements.
2. Data Infrastructure Enhancement: Improving data access and quality, particularly for regional languages, will support the creation of inclusive AI solutions tailored to India’s diverse population.
3. Policy Frameworks: Establishing clear guidelines and regulations for AI development and deployment ensures ethical practices and addresses concerns related to data privacy and job displacement.
4. Public-Private Partnerships: Encouraging collaboration between government entities and private companies can foster innovation, share resources, and promote responsible AI adoption across sectors.

By proactively addressing these challenges, India can harness AI’s transformative potential while safeguarding employment and promoting inclusive economic growth.

Government budgeting serves several key objectives to ensure a nation’s economic health and social welfare. One primary goal is the reallocation of resources, which involves directing funds towards sectors that maximize social and economic benefits. This can be achieved through tax concessions to encourage investment or by the government directly producing goods and services when the private sector is hesitant.

Another critical objective is the redistribution of income and wealth. By implementing progressive taxation and allocating funds to social programs, the government aims to reduce economic disparities between different segments of society.

Maintaining economic stability is also a fundamental aim. Through prudent fiscal policies, the government strives to control inflation, manage public debt, and ensure a stable economic environment conducive to growth.

In India, the government budget is composed of two main parts: the Revenue Budget and the Capital Budget. The Revenue Budget includes revenue receipts, such as tax revenues and other incomes, and the expenditure met from these revenues. The Capital Budget consists of capital receipts, like loans raised by the government, and capital expenditures on infrastructure and asset creation.

By focusing on these objectives and components, the government budget plays a pivotal role in steering the country’s economic direction and promoting the well-being of its citizens.

India’s subsidy system has undergone significant reforms aimed at enhancing efficiency and equity. A pivotal change is the adoption of Direct Benefit Transfers (DBT), exemplified by the PAHAL scheme for LPG subsidies, which has minimized leakages and ensured subsidies reach the intended beneficiaries.

Despite these advancements, challenges persist. The fiscal burden remains substantial, with subsidies accounting for about 8% of India’s total annual spending. In the upcoming fiscal year, the government plans to increase spending on food, fertilizer, and cooking gas subsidies by 8% to $47.41 billion, addressing higher food and energy costs.

Additionally, inefficient targeting has led to benefits reaching unintended recipients, and certain subsidies have inadvertently caused market distortions, such as the overproduction of specific crops due to skewed incentives.

To rationalize subsidies effectively, the following measures are recommended:

1. Comprehensive DBT Implementation: Expanding DBT to include fertilizer subsidies can reduce misuse and ensure that benefits reach genuine farmers. Linking DBT with Aadhaar and real-time digital monitoring is essential for transparency.
2. Dynamic Targeting: Regularly updating beneficiary lists using data such as the Socio-Economic and Caste Census (SECC) and household consumption surveys can improve accuracy in subsidy distribution. Integrating advanced analytics and AI-based data verification can further refine the subsidy pool.
3. Promoting Sustainable Alternatives: Encouraging the adoption of technologies like nano urea and organic fertilizers can reduce dependency on traditional subsidies. Nano urea, for instance, can save the government ₹10,000–₹15,000 crore annually while mitigating environmental harm.
4. Technological Integration: Utilizing technologies such as GIS and blockchain can enhance the efficiency and transparency of subsidy distribution. GIS mapping ensures that subsidies like fertilizers are granted only to actual cultivators, avoiding diversion. Blockchain can improve transparency in the Public Distribution System (PDS), ensuring that subsidies reach the correct beneficiaries.

Implementing these measures can help India balance fiscal discipline with social welfare, ensuring subsidies promote both efficiency and equity.

India’s transition towards renewable energy presents both significant challenges and opportunities, particularly in terms of storage and grid infrastructure.

Key Challenges

• Storage Limitations: Renewable energy sources like solar and wind are intermittent, and efficient energy storage solutions are still underdeveloped. This creates issues with maintaining a steady power supply when renewable generation is low.
• Grid Infrastructure: India’s existing grid infrastructure is outdated and not equipped to handle the decentralized and fluctuating nature of renewable energy. The lack of smart grids and efficient transmission systems hampers the integration of renewable energy at scale.

Opportunities

• Renewable Potential: India has vast renewable resources, including solar and wind energy, which can significantly reduce dependence on fossil fuels.
• Technological Advancements: Investments in battery storage, smart grids, and energy management technologies present opportunities to improve grid stability and storage efficiency.

Suggested Measures

• Improved Storage Technologies: Encourage research and development in advanced battery storage systems to store excess energy and provide backup during low production periods.
• Grid Modernization: Invest in smart grids, advanced metering, and stronger transmission networks to handle renewable energy’s fluctuating nature and ensure better distribution.
• Policy Support: Create policies that promote investment in renewable energy infrastructure and incentivize private sector involvement for an equitable and sustainable energy transition.

Definition of Public Debt

Public debt refers to the total financial liabilities incurred by a government to fund its expenditures beyond its revenue. This includes borrowings from domestic and international sources through instruments like bonds, treasury bills, and external loans.

Concerns Over Excessive Public Debt in India

• High Debt-to-GDP Ratio: India’s debt-to-GDP ratio has been rising, reaching approximately 83% in recent years. The International Monetary Fund (IMF) has cautioned that this ratio could exceed 100% in the future, raising concerns about fiscal sustainability.
• Interest Payment Burden: A significant portion of government revenue is allocated to servicing debt. This limits the fiscal space available for developmental and welfare expenditures, potentially hindering economic growth.
• Inflationary Pressures: Excessive public debt may lead to increased money supply if the government resorts to monetizing the debt, contributing to inflation and reducing the purchasing power of citizens.
• Crowding Out Private Investment: High government borrowing can lead to increased interest rates, making credit more expensive for the private sector. This ‘crowding out’ effect can deter private investment, adversely affecting economic growth.
• Intergenerational Equity: Mounting debt implies that future generations may bear the burden of repayment, potentially through higher taxes or reduced public services, raising ethical and economic concerns.

Addressing these challenges requires prudent fiscal management, including enhancing revenue generation, rationalizing expenditures, and implementing structural reforms to ensure sustainable economic growth.