Economic Survey calls for setting up an AI Economic Council to manage economic and labour-market impact of AI

India's Strategic Response to AI Economic Disruption

The Economic Survey 2025-26, tabled in Parliament on January 29, calls for a carefully coordinated approach to artificial intelligence that moves beyond viewing technology as merely a prestige investment. Instead, the government recognizes AI as an economic strategy with profound implications for productivity, competitiveness, and employment across the nation. The proposed AI Economic Council emerges as a cornerstone of this pragmatic framework, designed to operate with both technological and moral imperatives that remain sensitive to India's unique socio-economic realities. This institutional architecture represents a fundamental shift in how policymakers intend to govern AI adoption, ensuring that technology deployment aligns with the country's development priorities and workforce capabilities rather than creating fragile dependencies that could undermine long-term economic resilience.

The establishment of the AI Economic Council signals recognition that artificial intelligence requires governance structures distinct from traditional technological oversight. Unlike conventional tech councils that focus narrowly on innovation and technical advancement, this body is intended to coordinate economic strategy with evolving education and skilling infrastructure. The Council will operate as a coordinating authority responsible for navigating resource constraints while monitoring how AI deployment affects India's labour market. By positioning itself as a bridge between technology implementation and socio-economic impact management, the Council addresses a critical gap in current governance frameworks. The Survey emphasizes that this institution must balance competing imperatives: fostering innovation and productivity gains while simultaneously protecting workers and ensuring equitable economic outcomes across diverse sectors and income levels.

Protecting Workers While Embracing Technological Change

Contrary to widespread fears about automation and mass job displacement, the Economic Survey identifies specific sectors where human skills remain resilient and even essential. High-skill manual work, roles requiring deep empathy, and positions demanding complex human connection are identified as largely immune to AI-driven disruption. The Chief Economic Adviser explains that while AI excels at processing structured data, it struggles significantly with unstructured work—a category in which India's large services sector and diverse labour force excel. India requires the generation of approximately eight million jobs annually to maintain employment growth, and the government's strategy emphasizes that foundational soft skills including reasoning, communication, and adaptability will become increasingly valuable. This perspective transforms the narrative around AI from one of existential labour-market threat to one of productivity enhancement, where technology augments human capabilities rather than supplanting them entirely.

In a country like India, which is heavy on services and has a large labor force, AI is more likely to help humans rather than replace them, with the key being to focus on roles that require deep human connection.

The proposed "Earn and Learn" model represents a practical manifestation of this skills-focused philosophy, designed through co-creation between private sector employers and academic institutions. Rather than narrow technical training limited to programming or data analysis, this initiative emphasizes broader capabilities essential for navigating an AI-enriched workplace. Workers will develop competencies in critical thinking, creative problem-solving, interpersonal communication, and adaptive learning—skills that remain distinctly human and difficult to automate. The Survey stresses moving beyond conventional educational approaches toward integrated systems where AI literacy becomes embedded across all levels of workforce development. By preparing workers to collaborate effectively with AI systems rather than compete against them, India can potentially convert technological disruption into a source of enhanced productivity and employment quality improvement.

Institutional Sequencing and Long-Term Economic Resilience

The Economic Survey recommends a carefully sequenced roadmap for India's AI future, proceeding through three distinct phases: building coordination first, developing capacity next, and exercising regulatory leverage last. This phased approach reflects sophisticated understanding that premature policy intervention could create fragile dependencies or technological lock-in situations that limit future adaptability. The government proposes establishing an AI Safety Institute to monitor emerging risks, coordinate regulatory gaps, and conduct training programs that align with international standards. International collaboration with institutions like the United Kingdom's AI Security Institute and the United States National Institute of Standards and Technology ensures that India's regulatory framework remains compatible with global technological evolution while maintaining sovereignty over domestic implementation decisions.

India's AI strategy must account for specific structural constraints including capital availability limitations, energy consumption constraints, market depth variations, and institutional capacity variations across regions. Rather than adopting imported frameworks designed for developed economies with different resource profiles, the Survey advocates for technology choices that reinforce long-term growth while working within India's actual constraints. This pragmatic approach acknowledges that sustainable AI adoption requires alignment between technological capabilities and economic fundamentals. The strategy emphasizes that data should generate economic value while maintaining global interoperability, balancing the imperative for trusted data flows with transparency and auditability requirements. Through careful institutional design and sequenced policy implementation, the AI Economic Council can guide India toward an AI-augmented economy where technology serves human development objectives rather than constraining them through rigid dependencies or unequal global power dynamics.