Artificial Intelligence as a Driver of Trade Expansion

AI as a Catalyst for Trade-Driven Expansion

Trade facilitation: According to WTO simulations, AI in logistics and customs can lower trade expenses by as much as 15%.

Productivity enhancement: Automation powered by AI improves effectiveness in both manufacturing and services, increasing competitiveness.

Services that can be delivered digitally, such as legal tech, AI-driven programming, telehealth, and online education, are expected to increase by more than 40% by 2040.

AI-supporting products: The exchange of chips, servers, and sensors constitutes the foundation of the AI economy, worth USD 2.3 trillion (2023).

Leveraging AI for the Transformation of Trade in India

Enhancing Services Exports: In 2023-24, India exported over USD 250 billion in IT and IT-enabled services, establishing itself as a global frontrunner in digitally deliverable services.

AI can strengthen India’s position by increasing exports in software solutions, AI-driven healthcare (telemedicine), fintech, online education, and legal-tech services.

Boosting Manufacturing Competitiveness: AI in predictive upkeep, quality assurance, and supply chain enhancement can assist Indian manufacturers in competing on a global scale.

Collaboration with Make in India and PLI initiatives can allow India to seize a larger share of the global value chains (GVCs).

Enhancing Agricultural Trade: AI-driven precision agriculture, harvest predictions, and supply chain management can minimize waste and elevate export competitiveness in agricultural goods.

Enhancing SMEs and Startups: AI solutions for translation, compliance, and market insights can assist Indian SMEs in navigating obstacles in global trade.

With 63 million MSMEs in India, the use of AI could greatly enhance their involvement in exports.

Actions undertaken by India

NITI Aayog’s “#AIforAll” (2018) established India’s initial detailed plan for AI, concentrating on healthcare, agriculture, education, intelligent cities, and smart transportation.

The India Semiconductor Mission (ISM), sanctioned in 2021 with a budget of ₹76,000 crore, seeks to establish a strong domestic semiconductor ecosystem by offering financial support for chip production, display manufacturing, and design.

The IndiaAI initiative, with a budget of Rs.10,371.92 crore, created a holistic ecosystem to stimulate AI innovation.

What are the Obstacles?

Digital divide: Merely 41% of small businesses worldwide utilize AI, in contrast to more than 60% of large enterprises. In countries with low and lower-middle incomes, the adoption of AI is below 33%.

Income growth disparity: If catch-up does not occur, high-income economies might experience roughly 14% income growth, while low-income economies could achieve only about 8% by 2040.

Regulatory fragmentation: Varying AI regulations in different jurisdictions raise compliance expenses and could disrupt international trade patterns.

Concentration Risks: A small number of major companies lead AI development and infrastructure, leading to worries about monopolistic reliance and control over commercial advantages.

Path Forward

Measures at home:

Allocate resources to broadband, cloud infrastructure, and cost-effective AI equipment.

Establish national training initiatives to equip workers for industries that incorporate AI.

Guarantee that competition regulations stop monopolistic control.

Worldwide collaboration:

Align AI standards, ethical guidelines, and data management frameworks.

Enhance the capacity-building efforts of the WTO for less affluent economies.

Foster a shared agreement among multiple parties to prevent digital division.