The economy is grappling with demand-side concerns and rising job market disruption from artificial intelligence, according to the finance ministry’s latest report.

The September Monthly Economic Review points to steady labour indicators but flags an emerging trend of AI replacing human jobs.

While the overall unemployment rate held steady at 3.2 per cent for fiscal 2023-24, buoyed by increased female workforce participation, the report highlights fresh evidence of AI-driven job displacement.

“Anecdotal reports of AI displacing workers are beginning to emerge, and that needs watching,” the review notes, echoing a similar warning from the July Economic Survey about the threat of AI across low- to high-skill roles.

Despite robust formal job creation in some sectors, the ministry points to waning urban demand due to softening consumer sentiment, decreased foot traffic amid high rainfall.

Broader risks to economic momentum loom from global factors, including escalating geopolitical conflicts, financial market vulnerabilities and supply chain disruptions — all potential drags on Indian household spending and durable goods demand.

The report signals stability in formal job creation, with net payroll additions of 930,000 in August and strong youth entry into the organised workforce.