AI could slow BPO growth, says India’s chief economic advisor
MUMBAI, INDIA — India’s Chief Economic Advisor, V. Anantha Nageswaran, raised concerns about the potential short-term impact of artificial intelligence (AI) on the Business Process Outsourcing (BPO) sector.
Speaking on the sidelines of the Economic Survey 2023-24, Nageswaran acknowledged AI’s transformative potential but also highlighted its immediate challenges.
Potential productivity dip, workforce disruption
“The short-term challenge of generative AI could slow BPO sector growth, affecting customer services. It is possible that the jobs related to BPO will be under threat, whereas AI may actually turn out to be a booster,” he stated.
Nageswaran also noted that AI might reduce annual productivity growth by about 0.3 percentage points in the coming years. This potential dip is attributed to the adjustment period industries will need to integrate new technologies effectively.
Other industry experts share Nageswaran’s concerns. Rajesh Nambiar, Chairman of the National Association of Software and Service Companies (NASSCOM), highlighted the vulnerability of BPO employees to being replaced by AI technologies.
“People who work [in] process-related industry, which we traditionally used to call as BPO… Some of that runs the risk of getting replaced with an AI engine pretty quickly,” Nambiar stated.
Krithivasan, CEO of Tata Consultancy Services (TCS), has forecasted a significant shift in the call center industry due to the rapid advancement of AI. He envisions AI chatbots handling tasks traditionally managed by call center workers, potentially making the need for traditional call centers “minimal” within a year.
Krithivasan emphasizes the necessity for workforce training to meet the rising demand for tech talent and suggests that the focus should be on reskilling and upskilling the workforce.
Ethical concerns and long-term benefits of AI
Experts also highlight ethical and legal concerns. AI’s reliance on high-quality data raises issues around data privacy, security, and fairness. Ensuring compliance with regulations and addressing potential biases in AI algorithms are vital considerations for BPO companies.
Despite these challenges, Nageswaran emphasized AI’s promising long-term potential.
He pointed out that wider AI adoption could significantly enhance sectors such as healthcare and education, thereby improving human capital.
India’s economic growth projections
The Economic Survey 2023-24, presented in Parliament by Finance Minister Nirmala Sitharaman, projects robust growth for India. The survey indicates that India is on track to become the world’s third-largest economy within the next decade, largely benefiting from its young population.
The survey further states that the Indian economy can grow at a rate of 7% in the medium term, provided there is a collaborative effort between the Union Government, State Governments, and the private sector.
“To maintain a growth rate of over 7 per cent, the Union Government, State Governments, and the private sector must work together. India’s financial sector is experiencing significant changes,” the report noted.
In the fiscal year 2024, primary capital markets were instrumental in raising ₹10.9 lakh crore ($130.3 billion), contributing about 29% of the gross fixed capital formation for private and public companies in FY23.
The survey also touched upon global trends such as geo-economic fragmentation, the push for self-reliance, climate change, and technological advancements. These factors present a unique mix of opportunities and challenges for India, necessitating strategic responses to sustain growth.
