Artificial Intelligence (AI) has emerged as a transformative force in shaping sustainable economic development, particularly in emerging economies such as India. This study examines the role of AI in promoting inclusive growth, environmental sustainability, and economic efficiency using recent secondary data (2025–26). Globally, AI is projected to contribute approximately $15.7 trillion to the world economy by 2030, reflecting its growing significance as a general-purpose technology. In the Indian context, AI is a key enabler of the Viksit Bharat vision, supported by initiatives such as the IndiaAI Mission and Digital Public Infrastructure. India’s GDP growth is projected at 7.5–7.8%, while AI is expected to contribute $500–600 billion by 2030 and up to $1.7 trillion by 2035. The findings indicate that AI has generated measurable sectoral benefits, including an 18% increase in agricultural productivity, 28% reduction in healthcare costs, and 42% decline in lending costs, leading to the financial inclusion of over 30 crore individuals. Additionally, AI has contributed to 12% energy savings and 15% reduction in carbon emissions, supporting environmental sustainability. The technology has also created 6–7 million new employment opportunities, although 10–12% of jobs remain at risk due to automation. Furthermore, emerging states such as Bihar and Uttar Pradesh are experiencing accelerated growth rates of 12–15%, driven by AI-enabled development. Despite these advantages, challenges related to rising energy demand, data privacy risks associated with over 900 million digital users, and workforce reskilling persist. The study concludes that AI, when guided by the principles of inclusivity, sustainability, and ethical governance, can serve as a powerful catalyst for equitable and sustainable economic development.