AI and Trade Reforms Could Spark India’s Manufacturing Renaissance: World Bank Economist
India’s computer services exports have surged 30% since the launch of ChatGPT in November 2022, even as overall services exports have plateaued, according to Franziska Ohnsorge, World Bank’s South Asia Chief Economist. Highlighting Artificial Intelligence (AI) and trade liberalisation as major investment opportunities, Ohnsorge said AI adoption—especially in the BPO and IT sectors—has accelerated sharply, with 12% of new BPO job postings now requiring AI skills, double the pre-ChatGPT share.
Despite a slowdown in private investment post-pandemic, India continues to outperform other developing economies in this area, Ohnsorge said on the sidelines of the Kautilya Economic Conclave. However, she cautioned that weak foreign direct investment (FDI) remains a concern, with India’s FDI-to-GDP ratio trailing well below other emerging markets. A 97% decline in net FDI inflows in 2024–25, driven by large repatriations, has raised questions about investor confidence, she added.
Ohnsorge urged India to lower trade barriers and expand its network of free trade agreements to boost market access from 12% to around 50% of GDP—levels enjoyed by economies like Mexico and Vietnam. Such reforms, she said, could unlock a “manufacturing renaissance” by attracting FDI into tradable sectors and creating jobs for India’s youth. Reducing tariffs on intermediate goods, which currently hinder manufacturing competitiveness, and capitalising on AI-driven growth in services could together power India’s next investment wave, she concluded.
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