AI can boost productivity but pose risks to India's IT sector: Moody's
New Delhi: Moody's Ratings said on Thursday that artificial intelligence (AI) could boost productivity but also create displacement risks in emerging markets (EMs) with significant exposure to software, IT and business-process outsourcing. However, there is no clear evidence of either trend yet, even in potentially highly exposed markets such as India and the Philippines.
In its Global Emerging Markets Outlook 2027 report, Moody's said interest expenses will contribute more than deficits to rising debt in India and China. It expects both countries to increase their public indebtedness through a combination of primary deficits and higher interest payments.
Also Read: India's growth gets further votes of confidence as Moody's raises FY27 forecast to 7% from 6.5%
India, Russia and China, which are leading emerging market producers of metals essential for infrastructure such as data centres and power grids, including copper, bauxite, aluminium, zinc and tin, stand to benefit the most from rising demand. According to the ratings agency, inadequate access to computing capacity, digital infrastructure and skills could increasingly determine the ability of most emerging markets to capture AI-related gains.
"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.
Also Read: SBI economists halve December RBI rate hike forecast to 25 bps on easing rupee pressure, foreign inflows
Moody's expects GDP growth in the largest emerging markets in 2027 to remain broadly similar to 2026 levels, with some potential upside depending on an easing of the Middle East conflict. It has raised its projection for India's GDP growth in FY27 to 7% from 6.5% earlier. Moody's Ratings has forecast India's real GDP growth at 7% in both 2026 and 2027, with inflation projected at 4.5% in 2026 and 4.3% in 2027.
The agency said continued commodity demand will remain a key growth driver for some metal and energy producers, although overall growth will be slow and vary considerably across countries. Resilient consumer spending, where supported by favourable policies, and foreign direct investment (FDI), where significant, will also support growth in several emerging markets.
Moody's said most emerging market sovereigns will stabilise their debt burdens by containing spending, raising revenues or adopting a combination of both, offsetting the impact of higher interest rates.
In its Global Emerging Markets Outlook 2027 report, Moody's said interest expenses will contribute more than deficits to rising debt in India and China. It expects both countries to increase their public indebtedness through a combination of primary deficits and higher interest payments.
Also Read: India's growth gets further votes of confidence as Moody's raises FY27 forecast to 7% from 6.5%
India, Russia and China, which are leading emerging market producers of metals essential for infrastructure such as data centres and power grids, including copper, bauxite, aluminium, zinc and tin, stand to benefit the most from rising demand. According to the ratings agency, inadequate access to computing capacity, digital infrastructure and skills could increasingly determine the ability of most emerging markets to capture AI-related gains.
"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.
Also Read: SBI economists halve December RBI rate hike forecast to 25 bps on easing rupee pressure, foreign inflows
Moody's expects GDP growth in the largest emerging markets in 2027 to remain broadly similar to 2026 levels, with some potential upside depending on an easing of the Middle East conflict. It has raised its projection for India's GDP growth in FY27 to 7% from 6.5% earlier. Moody's Ratings has forecast India's real GDP growth at 7% in both 2026 and 2027, with inflation projected at 4.5% in 2026 and 4.3% in 2027.
The agency said continued commodity demand will remain a key growth driver for some metal and energy producers, although overall growth will be slow and vary considerably across countries. Resilient consumer spending, where supported by favourable policies, and foreign direct investment (FDI), where significant, will also support growth in several emerging markets.
Moody's said most emerging market sovereigns will stabilise their debt burdens by containing spending, raising revenues or adopting a combination of both, offsetting the impact of higher interest rates.
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