Artificial Intelligence And Economic Growth In Emerging Economies: Productivity, Inequality And Policy Pathways With Evidence From India And Karnataka

Artificial Intelligence (AI) is increasingly recognized as a transformative force shaping economic growth trajectories in emerging market economies (EMEs). These economies, which contribute more than half of global GDP growth, face structural challenges such as inadequate infrastructure, skill deficits and high levels of informality. AI offers a pathway to overcome these constraints by enhancing productivity, enabling innovation and facilitating leapfrogging over traditional stages of development. Empirical evidence suggests that AI adoption can increase total factor productivity (TFP) by 15–25% and contribute an additional 1–3% to annual GDP growth in high-readiness EMEs. India stands out as a prominent example due to its large digital ecosystem, expanding startup landscape and policy initiatives such as the India AI Mission and AgriStack. Karnataka, particularly Bengaluru, functions as a technological hub that bridges advanced AI innovation with agricultural and rural applications, demonstrating a model of inclusive growth. However, AI adoption also introduces challenges, including job displacement, digital inequality and ethical concerns related to bias and data privacy. This research article adopts a PRISMA-ScR-guided narrative review methodology, synthesizing 35 empirical studies from 2018 to 2026. It examines the mechanisms through which AI drives growth, evaluates sectoral impacts, analyzes challenges and proposes policy recommendations for inclusive and sustainable development. The findings highlight that while AI holds immense potential, its benefits are contingent upon investments in digital infrastructure, human capital and governance frameworks.