Grand Convergence Could Drive AI Revolution in India

The first approach emphasizes creating AI solutions tailored to local needs, which generates immediate social impact and economic growth. The second is long-term, as it requires investing in foundational models that can support a wide range of AI applications, ensuring long-term sustainability and global competitiveness.

To advance on both AI paths, one thing is clear. These ambitions require significant domestic investment. To leverage capital expenditure, India has a multi-pronged strategy that combines a strong policy framework, strategic manufacturing initiatives, and innovation hubs, thereby fostering an environment for AI companies and startups to thrive across sectors.

A key part of this strategy is India’s AI Mission, which includes components focused on increasing computing power, supporting innovation through the creation of dedicated AI hubs, developing large open datasets, supporting application development, upskilling the workforce, funding startups, and ensuring safe and proven AI practices.

Each piece is crucial to a thriving AI ecosystem. India has approached its AI mission in a manner similar to the Digital Public Infrastructure (DPI) strategy. Initial funding for graphics processing units (GPUs), semiconductors, and international technology transfer partnerships is being facilitated by the public sector.

However, the expertise and innovation that powers this underlying infrastructure is primarily provided by private entities, creating a dynamic environment for AI to thrive.

These elements of the AI ​​mission interact with India’s broader policy frameworks, such as the Digital Personal Data Protection Act (DPP), which establishes a legal framework for data protection and privacy.

The underlying architecture is the Data Empowerment and Protection Architecture (DEPA), which complements the DPPA by establishing a unified and interoperable framework for managing consent. DEPA enables individuals to control their personal data and manage consent preferences seamlessly across multiple platforms and services through a unified interface.

India’s strategy is not just about a robust regulatory architecture; it also includes manufacturing and market interventions, which are key to the AI ​​hardware ecosystem. Domestic production-linked incentive (PLI) schemes for telecom equipment, semiconductors, and large-scale electronics manufacturing are key in this context.

For example, production of basic electronic components such as batteries, chargers, camera modules and printed circuit boards has been concentrated in local markets, with major players such as the Tata Group entering the component manufacturing market.

PLI beneficiaries, representing around 20% of the market, accounted for 82% of mobile phone exports in 2022-23, with production increasing by over 125% and exports increasing four-fold from 2020-21.

Foreign direct investment in large-scale electronics manufacturing has increased by 254 per cent since the introduction of the PLI scheme, and the telecom sector has achieved 60 per cent import substitution.

These successes provide a solid foundation for a growing AI market that is expected to grow from $881 million in 2023 to $7.8 billion by 2025, alongside India’s GenAI industry that is expected to reach $17 billion by 2030. This market opportunity, coupled with India’s AI Mission goals and PLI schemes, could create a vicious cycle that will boost domestic capital.

As AI capabilities expand and diversify, they drive growth in economic output and create new business opportunities. PLI programs further enhance this growth by encouraging domestic production of essential AI hardware components, thereby reducing dependence on imports.

As domestic AI companies grow, they attract more investment, both from India and around the world, increasing the capital available for research expenditure. This inflow of capital supports the creation of advanced AI applications, which in turn increases the productivity and efficiency of the economy.

Emerging AI companies are playing a key role in driving innovation. By 2025, four sectors—industrial and automotive, healthcare, retail, and consumer packaged goods—are expected to contribute 60% of AI gross value added to India’s GDP.

Companies like Sarvam and Krutrim are taking steps to build foundational AI models, while mainstream IT services firms are exploring AI use cases in the banking, financial services and insurance sectors, and not just in the agritech domain.

Cutting-edge startups are working on conversational AI to solve serious enterprise problems, while others are pioneering AI-powered video and storytelling platforms.

The synergy between India’s AI mission, policy certainty (through DPDP Act and DEPA), market opportunities, National AI Fund and PLI schemes can make the country a global leader in AI. We have what it takes for a self-reinforcing cycle of domestic capital augmentation, startup innovation, efficient data management and hardware manufacturing.