Developing countries, especially India, risk a serious economic crisis. This is due to the rise of AI and the use of renewable energy. A recent UNCTAD report found that AI is hurting labor-intensive services. It is causing a sharp decline in jobs.
Impact of AI: Job cuts and impact on exports
AI chatbots are now handling tasks once done by humans. These include technical support and customer service. This has reduced demand for labor, hurting countries like India and the Philippines.
In 2023, seven major IT companies in India, including TCS and Infosys, lay off 75,000 of their employees. This is about 4% of their total workforce. Foreign direct investment (FDI) patterns show this trend. High-value sectors now account for 63% of FDI, up from 45% in 2004-2007.
Economic challenges for developing countries
This shift may lead to two major financial problems:
Reduced export revenue: A fall in export prices will lower demand. This will hurt local investment.
Rising debt burden: As export earnings fall, repaying foreign debt will be tough. This could worsen economic imbalances.
It will hit India and other developing countries hard. Their economies depend on labor-intensive services and exports. AI is cutting jobs in sectors like customer service. They were once the main source of work for Indian youth.
UNCTAD warns that, if unaddressed, it could cause “complex, systemic crises” in developing countries. Political measures are needed.
Developing countries must, to meet this challenge, create new policies. They also need to boost investment in high-value, stable sectors.
Adjusting to AI: Countries must adapt to AI and start new skill-based training programs.
Green energy jobs: More investment in renewables can create local jobs.
Public-private partnership: The government and private sector must team up to fix the debt crisis.
AI and renewable energy present challenges and opportunities for developing countries. However, the right strategies and measures are needed in time to avoid its negative impacts. Otherwise, countries like India may suffer from economic instability and rising debt.
