NEW DELHI: AI may be making workplaces smarter, but it has also kept employees on their toes since its advent, leaving many wondering if their jobs are next on the chopping block. This could be a particular concern for countries such as India, where IT services and business-process outsourcing (BPO) are major sectors. However, AI's impact on jobs and productivity is not clearly visible in India yet, Moody’s Ratings said on Thursday.
The bigger challenge for emerging economies could be getting the basics right to benefit from AI. Access to computing power, digital infrastructure and skilled workers will increasingly decide how much countries can gain from the technology, Moody’s said in its Global Emerging Markets Outlook 2027 report. The agency expects economic growth in the largest emerging market economies to remain largely unchanged in 2027 compared with 2026. However, growth could be better if the conflict in the Middle East eases. Moody’s has already raised its GDP growth forecast for India in FY27 to 7% from 6.5% earlier.
Can AI be a boost or a job threat?
For countries that depend heavily on software, IT services and BPO, AI could have two sides. While it may help businesses improve productivity, it could also lead to job losses. India and the Philippines are among the emerging economies that could face the biggest impact because of their exposure to these sectors. But there is no clear evidence of either trend so far, Moody’s said.
"For EMs with significant levels of software or IT and business-process outsourcing exposures, AI could both raise productivity and create displacement risks. But even for India and the Philippines — the potentially most-exposed EM countries — there is no current clear illustration of either trend," Moody's said.
Demand for commodities will continue to support some emerging economies, particularly countries that produce metals and energy. However, growth is expected to remain slow and differ considerably from one country to another. Spending by consumers, especially where government policies support it, will also help some economies. Foreign direct investment (FDI) will be another source of growth for countries that attract significant investment.
Keeping government debt under control will remain a challenge for emerging economies as interest costs rise. Moody’s expects most emerging market governments to keep their debt levels stable by controlling spending, taking steps to increase revenue or doing both. However, governments may not have enough room to deal with fresh economic shocks. Rigid spending commitments could limit their ability to respond to events such as a possible record El Nino.
"The fiscal space for policy responses to further shocks, such as the potential impact of a record El Nino, may however be constrained due to rigid spending structures. Some of the larger EM sovereigns will choose to keep their spending above revenues which, along with higher interest costs, will increase their debt," Moody's said. Brazil, China and India are among the major emerging economies expected to see their public debt increase. This will be due to a combination of spending more than they earn and paying higher interest on existing debt. For China and India, higher interest payments are expected to add more to their debt than budget deficits.
AI investment to support global growth
In a separate Global Sovereign Outlook report, Moody’s said the global economy is expected to maintain steady growth in 2027. Healthy finances of banks, companies and households, along with governments' response to the energy shock caused by the Middle East conflict, will support economic activity. Investment in AI and a gradual return of oil supplies to normal levels are also expected to help. These factors could allow governments to keep their debt levels stable in 2027. However, higher interest rates, lower-than-expected returns from AI investments and fresh geopolitical tensions remain key risks to the outlook.
"Risks include higher interest rates, weaker than expected AI investment returns with economic and financial spillovers and renewed geopolitical shocks," it added.
