AI for Inclusive Societal Development

UPSC Syllabus Topic: GS Paper 3 -growth and development

Introduction

India’s growth cannot be inclusive if 490 million informal workers stay outside formal protections, skills, and productivity gains. AI and frontier technologies can help, but change will not happen by itself. Human intent, coordinated investments, and a supportive ecosystem must come together so technology becomes accessible, affordable, and truly useful at the margins. NITI Aayog’s study AI for Inclusive Societal Development (with Deloitte) centres this urgency and proposes a mission-mode roadmap. Without deliberate action, average informal worker incomes could stagnate near $6,000 by 2047—well below the $14,500 benchmark needed for high-income aspirations. AI for Inclusive Societal Development.

Current State of Informal Workers in India

1. India’s informal trade workforce is about 490 million and remains largely outside core economic gains.

2. Around 90% of India’s labour force works in the informal sector, spanning construction, agriculture, logistics, retail, and artisanal manufacturing.

3. Average productivity of informal workers is ~US$5/hour, roughly half the overall average US$11/hour.
4. Women’s participation in the workforce sits at 37 percent, compared with a global average of 47 percent.
5. India’s informal sector contributes around 45 percent of the GDP , playing a critical role in the economy.
6. Sectoral spread : Informal work spans agriculture (46–48%), construction (15–17%), civic/health services (8–10%), retail/food (6–8%), manufacturing (4–6%), artisans (2–4%), logistics (3–5%), and others (7–10%).

Challenges Faced by Informal Workers

Recurring issues consolidate into five themes: financial fragility, market access gaps, skilling and adoption problems, social protection and occupational safety deficits, and productivity gaps..

1. Financial fragility: Informal workers face irregular, delayed wages and volatile earnings. Limited savings buffers and unverifiable income histories block access to formal credit, insurance, and emergency finance, deepening vulnerability to illness and demand shocks.
2. Market access:

• Workflows depend on intermediaries and word-of-mouth networks, not reliably predictable demand pipelines. Weak discovery on inclusive platforms limits steady orders.
• Migrants lack portable proofs and job-matching, inviting exploitation and downtime between gigs. Opacity keeps prices low and further discourages investment.

3. Skilling and adoption:

• Training remains fragmented, generic, and disconnected from real jobs. Digital tools are rarely vernacular, adaptive, or offline-friendly, so last-mile uptake and learning outcomes stay limited.
• Workers cannot easily earn portable credentials that prove competence, making progression, apprenticeships, and credit for skills difficult.

4. Social protection and safety:

• Many remain outside health cover, pensions, or income-loss protection. Records are non-portable, applications confusing, and awareness low.
• Hazardous worksites persist without monitoring or protective technologies.
• Occupational injuries, illness, and downtime push households into debt, while compensation mechanisms are slow or inaccessible.

5. Productivity gaps:

• Minimal mechanisation and manual processes reduce hourly output. Poor workflow planning, tool unavailability, and lack of performance visibility block continuous improvement.
• Credit constraints delay upgrades to safer, more efficient equipment. Over time, low productivity locks workers into low wages and reinforces informality across sectors.

Technology Pathways for Transforming the Informal Workforce

1. Unified trust layer with verifiable credentials: Create a trusted worker profile where identity, skills, and work history are captured as Verifiable Credentials (VCs)—digitally signed, tamper-proof records in a wallet. Because these VCs are interoperable and instantly verifiable, employers, lenders, and welfare agencies can trust claims, speeding access to jobs, credit, and benefits.
2. Smart contracts: Encode service agreements as self-executing smart contracts (including on distributed systems) so wages auto-release on milestone completion. This reduces disputes and delays, and the digital payment trail that results becomes an auditable record to underwrite future credit.
3. Frictionless access : Use consent-based data sharing to auto-fill applications from trusted sources (VCs, Aadhaar, e-Shram). Pair this with multilingual, voice-first AI assistants that adapt to literacy and local context, guiding workers through schemes, loans, and registrations. This turns 4. Digital Public Infrastructure (DPI) into truly usable last-mile delivery.
4. Market integration: Integrate worker credentials with ONDC and GeM to auto-create micro-storefronts for verified sellers; run AI-powered local demand matching to alert nearby gigs, orders, and bulk-buy opportunities.
5. Use adaptive learning pathways and AR/spatial computing for hands-on practice; pair with AI tutors for personalised journeys on low-end phones and kiosks—raising skill relevance and retention.
6. AI knowledge graphs: Provide Generative-AI knowledge assistants that combine loom blueprints, process recipes, buyer trends, and schemes into a navigable knowledge graph, offering real-time, context-aware fixes in local languages.

Need for Urgent Action

1. Growth gap to 2047: If India grows at 6.3%, GDP will be about US$15.3 trillion by 2047, far below the US$30 trillion aim. At this pace, informal workers’ average income reaches only ~US$6,000; with ~10% tech-enabled growth, ~US$14,500 becomes possible.
2. Favourable conditions for India: India has a young population, fast digital adoption, and strong rails—Aadhaar, UPI, Jan Dhan, BharatNet—backed by a vibrant AI ecosystem. These conditions allow rapid, inclusive rollout of worker-centric solutions at national scale.
3. Risk of exclusion: Without timely action, millions may remain off platforms, credit, insurance, and skilling pathways. Exclusion in a tech-driven economy will deepen inequality and waste India’s demographic and digital momentum.

Key Recommendations

1. Mission Digital ShramSetu: NITI Aayog proposes Mission Digital ShramSetu to make AI accessible, affordable, and impactful for every informal worker. The mission will deploy AI, blockchain, and immersive learning to dismantle structural constraints, expand market access, and strengthen social protection.
2. Using what exists, better: Multiple programmes already target informal workers: e-Shram, PM Vishwakarma, PM SVANidhi, Ayushman Bharat, NULM, and NRLM. There is need for convergence and tech-enabled last-mile delivery rather than creating entirely new silos.
3. Enable a federated trust and credentialing ecosystem: Develop a federated trust model to enable entities such as training providers, gig platforms, employers and government bodies to issue verifiable work and skill credentials, with real-time updates through standardised protocols.
4. Encourage innovation and incentivise adoption of frontier technology: Support startups developing frontier technology-based solutions through grants, tax breaks, regulatory sandboxes, Research & Development (R&D) incentives and public procurement pathways.
5. Strengthen AI and digital infrastructure for inclusive access: Scale vernacular AI through initiatives such as Bhashini and AI4Bharat to support local speech and dialects.
6. Empower Private Sector ownership: Create sector-specific incentives for private sector organisations to fund and build digital interventions.
7. Digitise and standardise informal sector knowledge: Partner with industry bodies and training institutes to digitise sector knowledge and integrate it into multilingual AI knowledge graphs for different industries.
8. Invest in affordable tools and local tech workforce: Promote local R&D and manufacturing of affordable tools under the Make in India initiative, enable tech-rental models via Self Help Groups (SHGs) and trade bodies and train district-level tech operators to drive adoption and support in low-literacy contexts.
9. Uphold data privacy, AI ethics and user protection: Implement worker-centric data protections under the Digital Personal Data Protection (DPDP) Act, release edge-compliant platform guidelines and establish clear safety, insurance and liability norms for AI and robotic tool usage. There is a need for organisational discourse and accountability mechanisms to uphold workers’ rights and build trust in AI systems.
10. Drive grassroots innovation and worker outreach: Incentivise states to launch mission-mode programmes for informal trades, repurpose district infrastructure as digital workforce hubs, enable co-funding by ULBs/ panchayats, strengthen partnerships with local institutions for digital literacy and drive skill enhancement initiatives through targeted incentives.

Question for practice:

Discuss how AI-led technology pathways can address the five core challenges of India’s informal workforce and explain why urgent action is essential to meet the 2047 goals.