Artificial intelligence: Not hype but an economic catalyst

As the world’s largest democracy, India navigates a complex landscape of diverse cultures and socioeconomic challenges. In this ever-evolving environment, artificial intelligence (AI) has emerged as more than just a technological breakthrough; it is a catalyst reshaping India’s trajectory.

Generative AI (GenAI) is poised to significantly impact India’s economy. Projections suggest it could add a cumulative $1.2-1.5 trillion to our GDP over the next seven years. Given India’s strength as a tech-services provider, GenAI alone could contribute about $100 billion a year to the economy.

India boasts of high levels of AI skill penetration, with three times more AI-skilled talent than all other countries. Over the past seven years, India has seen a 14-fold increase in individuals skilled in AI. 

Despite this robust talent pipeline, we must continue to prioritize skill development across multiple technologies to fully realize our DeepTech potential.

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The demand for AI talent in India is expected to grow by approximately 15% by 2027, while the market itself is projected to expand by 25-35%. This gap represents a discrepancy that highlights an urgent need to upskill existing talent and break the traditional linear growth model tied to revenue and full-time equivalents.

Currently, skills in machine learning, Python and SQL dominate the AI landscape, with growing importance being placed on GitHub, PyTorch and Databricks. Notably, GenAI patent families in India are heavily concentrated in applications related to networks and smart cities, indicating a strategic focus on urban infrastructure and connectivity advancements. 

This underscores our proactive approach to leveraging GenAI to tackle societal and technological challenges, particularly in enhancing urban environments.

Recognizing the importance of research and development (R&D) within the AI ecosystem, the Indian government has announced the establishment of three Centres of Excellence (CoEs) in AI at key educational institutions, with an allocation of ₹2,550 crore (about $30.5 million) in the Union budget for 2024-25. 

These CoEs aim to position India prominently on the global AI stage through foundational and multidisciplinary research and the development of core AI technologies.

Similarly, the National AI Mission aims to build and support our AI ecosystem through a combination of public expenditure and supportive policies. These include budgetary allocations, enhancing institutional capacity and fostering R&D. 

A primary objective is to establish indigenous computing infrastructure, which the government is attempting to address through the National Supercomputing Mission, which is focused on creating high- performance computing capabilities.

Additionally, the country’s National Semiconductor Mission seeks to develop domestic expertise in hardware components to drive large-scale innovation in the field of AI.

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The government’s strategy for AI computing infrastructure mirrors the approach it has taken for the semiconductor mission, incentivizing private sector involvement while enhancing public sector capabilities through The Centre for Development of Advanced Computing (C-DAC). 

The transformative potential of quantum computers in accelerating AI development suggests that the National Quantum Mission could create future synergies with the AI Mission.

On the regulatory front, the government is expected to take a balanced approach to AI, as seen in its recent technology laws, such as the new law on data protection. 

Building an AI ecosystem in India requires addressing unique challenges, including regional and linguistic diversity and sector-specific needs. The development and expansion of this ecosystem will depend on how successfully the government, institutions and firms are able to collaborate.

India’s AI market value is projected by Nasscom to reach $17 billion by 2027. Meanwhile, India is already recognized as the world’s fastest-growing major economy and it remains resilient amid global challenges. 

Envisioned to become the world’s third-largest by 2027, with aspirations of expanding to $26 trillion in the future, the country’s journey will be intertwined with the adoption of GenAI.

Also read: Economic Survey flags impact of AI on workers, puts onus on pvt sector to create jobs

As India gears up to become one of the largest markets in the world, AI applications hold immense potential to enhance enterprise growth and productivity, paving the way for transformative change.