NurPhoto by way of Getty Pictures)This week, tech giants Amazon and Microsoft pledged an eye-popping $50bn-plus mixed funding in India, placing synthetic intelligence (AI) within the highlight.
Microsoft’s Satya Nadella introduced his firm’s largest funding ever in Asia – $17.5bn (£13.14bn) – “to assist construct the infrastructure, abilities, and sovereign capabilities wanted for India’s AI-first future”.
Amazon adopted swimsuit, and mentioned it was placing in additional than $35bn within the nation by 2030, with an unspecified chunk of that funding going into boosting AI capabilities.
The bulletins come at a very fascinating juncture.
As fears of an AI bubble swept international markets and tech inventory valuations soared, a number of main brokerages took a contrarian view on India’s AI panorama.
Christopher Wooden of Jefferies mentioned the nation’s shares have been a “reverse AI commerce”. That principally means India ought to outperform different markets on this planet “if the AI commerce all of a sudden unwinds” – or just put, the worldwide bubble bursts.
HSBC additionally held an analogous view, saying Indian equities supplied a “hedge and diversification” for these uneasy with the continued AI rally.
This comes as Mumbai shares have lagged behind their Asian friends over the previous yr, with overseas traders transferring billions into Korean and Taiwanese AI-driven tech firms within the absence of comparable alternatives in India.
On this backdrop, the Amazon and Microsoft investments present a much-needed fillip – but it stays value asking the place India actually stands within the international AI race.
AFP by way of Getty PicturesThere aren’t any simple solutions.
The adoption of AI in India has been fast. Investments into some elements of the worth chain – similar to knowledge centres, the bodily spine of AI, or chip-making amenities – have begun trickling in. Simply this week, American chipmaker Intel introduced a collaboration with Mumbai-based Tata Electronics to fabricate chips domestically.
However in relation to a sovereign AI mannequin, it seems India is continuous to play catch-up.
A couple of year-and-a-half in the past, the Indian authorities launched an AI mission via which it started supplying start-ups, universities and researchers with high-end computing chips to develop a big homegrown AI mannequin like OpenAI or China’s DeepSeek.
In accordance with the federal electronics ministry, the launch of the sovereign mannequin – which helps greater than 22 languages – is imminent. Within the interim although, the likes of DeepSeek and OpenAI have made additional advances, launching newer variants.
Whereas the federal government has recognised the necessity to cut back over-dependence on overseas platforms due to the danger of surveillance and sanctions, India’s $1.25bn sovereign mission is a shadow of France’s $117bn or Saudi Arabia’s $100bn programmes.
The nation’s ambitions additionally face quite a few different hurdles – from semiconductor availability to expert expertise and fragmented knowledge ecosystems, in keeping with international consultancy EY.
India at present lacks sufficient computational infrastructure or the billions of {dollars} of analysis and improvement (R&D) funding remodeled a long time that gave China and the US a definite leg up.
Regardless of its international energy in AI expertise, India struggles to maintain its builders at residence.
“The present tightening of abroad work visas supplies India a window of alternative to retain home expertise and appeal to Indian-origin expertise at residence. Nonetheless, on condition that top-tier AI expertise is cellular globally, enticing coverage incentives have to be put in place to incentivise relocation to India,” the EY report says.
China, for instance, presents a spread of incentives similar to “monetary assist and subsidies, tax incentives and funding for analysis and improvement, particular expertise visas and fast-track immigration”, the report says.
India has a a lot larger focus of AI-skilled professionals than the worldwide common – particularly, 2.5 instances extra. Insurance policies that retain this expertise aren’t but in place.
Bloomberg by way of Getty PicturesBut, regardless of the challenges, India – together with international locations like Brazil and the Philippines – punches above its weight in AI, particularly within the context of its stage of financial improvement, an UNCTAD (United Nations Convention on Commerce and Improvement) research mentioned.
In accordance with the broadly tracked Stanford AI Index 2025, the nation ranks among the many prime 5 on this planet on new firms receiving AI investments.
Final yr, 74 new Indian AI startups acquired funding – a fraction of the greater than 1,000 funded within the US.
Indian AI startups raised simply $1.16bn privately, in contrast with over $100bn within the US and practically $10bn in China.
However there’s sufficient mental engagement with AI in India, with the nation accounting for 9.2% of AI article publications – barely greater than the US, however behind Europe and China in keeping with the Stanford AI Index.
Consultants say India’s AI edge could lie much less in constructing expensive language fashions and extra in utilizing them downstream to spur entrepreneurship.
“I believe within the brief time period, there’s this huge focus of AI within the US. However over the following five-10 years, AI may have a massively democratising impact on the creation of recent firms. Small founders and entrepreneurs might be quite a few and the downstream impact might be superb for locations like India and the Asia-Pacific,” Shailendra Singh, managing director of Peak XV Companions which invests in AI start-ups, instructed the BBC.
Mr Singh says India is seeing a surge in AI-powered shopper apps, with AI startup investments doubling from final yr.
Furthermore, many Indian startups are actually utilizing AI to deal with real-world challenges for tens of millions nonetheless on the mistaken aspect of the digital divide.
For instance, MahaVISTAAR, an AI app run by the Maharashtra authorities, delivers important agricultural info within the native Marathi language, reaching over 15 million farmers.
“The toughest locations to make synthetic intelligence work are additionally the locations the place it issues most. If AI can serve India’s school rooms, clinics and farms, it may well serve the world,” Nandan Nilekani, the architect of India’s biometric programme, wrote in The Economist journal final month.
A few of that has already begun to occur, as apps like MahaVISTAAR and others have proven.
AI brings new alternatives, however might disrupt India’s IT providers sector, which has pushed its financial system and created tens of millions of jobs over the previous 30 years.
As AI upends a few of their enterprise features, India’s billion-dollar IT corporations will turn into a key space of “vulnerability”, in keeping with Jefferies.
That vulnerability is already exhibiting.
Development in India’s IT again places of work is slowing, shares are underperforming, hiring has shrunk and wages have stagnated because the spectre of a brand new disruptor looms giant.
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