While highlighting that recruitment for AI-substitutable roles has sharply declined, the demand for skills that complement Artificial Intelligence (AI) has risen. In an interview with CNBC-TV18’s Abhimanyu Sharma, she mentioned that the South Asian labor market is shifting towards skills that AI can enhance.
Ohnsorge described government initiatives aimed at promoting AI adoption as a sound strategy to stimulate medium-term growth, leveraging global technological advancements. She asserted that one of the foremost challenges for South Asia is to “create more and better jobs,” a growing difficulty in the current climate.
Emphasizing the need for comprehensive measures that lay the groundwork for inclusive growth, including infrastructure investment and skill development as priorities for South Asia, she pointed out that optimal industrial policies for certain strategic sectors effectively address market failures.
She noted that South Asia’s services exports, particularly in the BPO sector, have seen rapid growth; however, job growth prospects are declining in the short term, with the services sector facing both risks and opportunities tied to AI adoption.
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Despite an anticipated slowdown in growth from 7% last year to 6.3% this year, primarily due to challenges stemming from global energy market disruptions, she mentioned that the region possesses promising growth potential in the medium term, partly due to ongoing trade reforms.
She projected that the recent Free Trade Agreements (FTAs) finalized by India with the European Union (EU) and the United Kingdom (UK) have significantly enhanced preferential access to global markets, stating that new FTAs offer more than just tariff reductions, including visas, Mutual Recognition Agreements (MRAs), and reduced friction from non-tariff barriers.
Ohnsorge highlighted that previous World Bank reports have indicated that deeper FTAs yield greater GDP gains than trade agreements focused solely on tariff cuts. She noted that South Asian governments have utilized industrial policy to address job creation challenges, generating better jobs at a pace twice that of other emerging markets, with a significant portion of these policies aimed at manufacturing and sectors that provide more jobs and higher wages.
She called for integrated approaches by South Asian economies to establish the foundation for broad-based growth, emphasizing the need for infrastructure investment and skill development while advocating for industrial policies that directly tackle market failures in strategic sectors where governments aim to direct the economy.
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