India, currently one of the fastest-growing major economies in the world, stands at a critical juncture where technological advancement is reshaping its economic trajectory. With a nominal GDP approaching $5 trillion in 2026 and a growth rate of approximately 7.2%, the country is positioning itself as a global leader in digital transformation. Artificial Intelligence (AI) has emerged as a key enabler in this transformation, driving productivity, fostering innovation, and supporting the vision of "Viksit Bharat" (Developed India) by 2047. The Indian AI market, valued at around ₹99,400 crore in 2025, is projected to expand to ₹2.7 lakh crore by 2031, reflecting rapid adoption across sectors.AI is expected to contribute between $500 billion and $957 billion to India's GDP by 2035, with optimistic projections reaching up to $1.7 trillion. With approximately 89% of Indian organizations adopting AI—significantly higher than the global average of 69%—India demonstrates strong readiness for AI-driven growth. The country also possesses a robust talent pool of nearly 6 million AI professionals, supported by initiatives such as the IndiaAI Mission, which allocates ₹10,372 crore for infrastructure, datasets, and skilling. Sectoral impacts of AI are widespread, including enhanced productivity in banking (up to 40%), manufacturing (30%), agriculture (20%), and healthcare (high diagnostic accuracy). However, challenges such as job displacement, data security concerns, infrastructure limitations, and ethical issues must be addressed. This research article examines the macroeconomic contributions of AI, its sectoral applications, employment implications, policy frameworks, and future projections, with a particular focus on Karnataka's role as a leading AI hub.