Opinion
A great convergence could drive India’s AI revolution
Summary
- The country is in a sweet spot, one where public policy and private efforts can combine to yield success. Elements of the India Stack, a government push and AI startups can all play key roles in India’s ascent on the sophistication curve of this red-hot field of technology.
The artificial intelligence (AI) revolution is a talking point across board rooms, industry round-tables and policy circles, not only in India, but globally. India is forging two pivotal paths in its quest for AI leadership: first, by positioning itself as a leading use-case market, and second, by developing foundational AI models.
The first approach emphasizes creating AI solutions tailored to local needs, driving immediate societal impact and economic growth. The second is long-drawn, as it requires investing in foundational models that can support a wide range of AI applications, ensuring long-term sustainability and global competitiveness.
To achieve progress on both AI tracks, one thing is clear. These ambitions require substantial domestic investment. To augment capital expenditure, India has a multifaceted strategy that combines robust policy frameworks, strategic manufacturing initiatives and innovative centres, thereby fostering a supportive environment for the growth of AI enterprises and startups across sectors.
Also read: How India plans to make AI accessible for all
Central to this strategy is India’s AI mission, which includes components focused on enhancing computational capacity, fostering innovation through dedicated AI centres, developing extensive open data-sets, supporting application development, upskilling the workforce, financing startups and ensuring safe and trusted AI practices.
Each element is crucial for a thriving AI ecosystem. India has approached its AI mission in a way that is similar to its Digital Public Infrastructure (DPI) strategy. Initial funding for graphic processing units (GPUs), semiconductors and international technology transfer partnerships is being facilitated by the public sector.
However, the expertise and innovation driving this foundational infrastructure are primarily provided by private players, creating a dynamic environment for AI advancement.
These components of the AI mission work in tandem with India’s broader policy frameworks, such as the Digital Personal Data Protection (DPDP) Act, which establishes a legal structure for data protection and privacy.
The underlying architecture is the Data Empowerment and Protection Architecture (DEPA) that complements the DPDP Act by establishing a standardized and interoperable framework for consent management. DEPA empowers individuals to control their personal data and manage consent preferences seamlessly across multiple platforms and services through a unified interface.
India’s strategy does not solely rest on sound regulatory architecture; it also includes manufacturing and market interventions crucial for the AI hardware ecosystem. The country’s production-linked incentive (PLI) schemes for telecom hardware, semiconductors and large-scale electronics manufacturing are pivotal in this context.
For instance, the manufacturing of essential electronic components—such as batteries, chargers, camera modules and printed circuit boards—has been localized, with major players like the Tata Group entering the component manufacturing space.
Also read: 92% of knowledge workers in India use AI at work as compared to the global figure of 75%.
PLI beneficiaries, representing about 20% of the market, drove 82% of mobile phone exports in 2022-23, with production having risen over 125% and exports having gone up fourfold since 2020-21.
Foreign direct investment in the large-scale electronic manufacturing has surged 254% since the PLI scheme’s inception, and the telecom sector has achieved 60% import substitution.
These successes lay a strong foundation for an expanding AI market, projected to grow from $881 million in 2023 to $7.8 billion by 2025, alongside the Indian GenAI industry, expected to reach $17 billion by 2030. This market opportunity, when coupled with the objectives of India’s AI mission and PLI schemes, can create a virtuous cycle that augments domestic capital.
As AI capabilities expand and diversify, they drive increased economic output and create new business opportunities. The PLI schemes further bolster this growth by incentivizing the manufacturing of essential AI hardware components within the country, thereby reducing dependency on imports.
As domestic AI enterprises grow, they attract more investment, both from within India and globally, enhancing the capital available for research expenditure. This influx of capital supports the creation of advanced AI applications, which in turn drive productivity and efficiency gains in the economy.
Emerging AI enterprises are playing a crucial role in driving innovation. By 2025, four sectors—industrial and automotive, healthcare, retail and packaged consumer goods—are expected to drive 60% of the gross value added by AI to India’s GDP.
The likes of Sarvam and Krutrim are taking strides on foundational AI models, even as incumbent IT service firms explore AI use-cases in the banking, financial services and insurance sector, apart from agri-tech domains.
New-age startups are working on conversational AI to solve high-impact enterprise problems, while others are pioneering AI-powered video and voiceover creation platforms.
Also read: Economic Survey flags impact of AI on workers, puts onus on pvt sector to create jobs
The synergy between India’s AI mission, policy certainty (through the DPDP Act and DEPA), market opportunities, the National AI Fund and PLI schemes can make the country a global AI leader. We have in place what’s needed for a self-reinforcing cycle of domestic capital augmentation, startup innovation, effective data management and hardware production.
