Centre flags AI impact on jobs that 'needs watching', projects India's growth outlook at 6.5-7% for FY25

India’s economic growth shows continuing recovery momentum, although some indicators reflect signs of softening, according to the Union finance ministry’s monthly economic review for September. In the fourth consecutive year of recovery since the contraction in FY21, the report highlights steady performances in the agriculture and services sectors but acknowledges a slight cooling in manufacturing output.

Aided by above-normal monsoon rainfall and ample inputs, India’s kharif sowing exceeded both last year’s figures and the five-year average. Heavy rains, however, dampened mining and construction activities and led to a slowdown in road transport-related services in Q2 FY25. Business sentiments remain optimistic, with Reserve Bank of India (RBI) surveys indicating strong manufacturing expectations for the coming quarters.

After two months of easing inflation, consumer prices climbed in September, largely attributed to volatile vegetable supplies impacted by erratic monsoon patterns. However, inflation in other food categories eased, with pulses inflation declining to single digits, supported by the government’s Bharat Dal initiative and heightened stock monitoring.

Employment trends show stability, with a steady unemployment rate of 3.2% in 2023-24, spurred by an expanding female workforce.

"High-frequency indicators, such as the net payroll additions under the Employee Provident Fund Organisation (EPFO), Purchasing Managers’ employment sub-index and NaukriJob Speak index, highlight a rise in formal employment generation," the report said.

"All that said, anecdotal reports of the deployment of Artificial Intelligence displacing workers are beginning to emerge. That needs watching," it added.

The finance ministry projected a positive outlook for the Indian economy, supported by a stable external sector, a favourable agricultural outlook, and potential government spending that could stimulate investment. Growth for the fiscal year is forecast between 6.5% and 7.0%, though risks remain from geopolitical tensions, global trade uncertainties, and potential financial market disruptions in advanced economies.

"Sentiment towards India among international direct and portfolio investors is positive. Sustaining India’s growth momentum is essential to turn these positive sentiments into actual direct and portfolio investments in the country," the ministry said.