As the global race for artificial intelligence dominance accelerates, India is striving to establish itself as a key player. However, experts warn that the country is falling behind in developing foundational AI models, particularly in comparison to the United States and China.

Two years after ChatGPT revolutionized AI, China’s DeepSeek has shaken the industry again by dramatically reducing the cost of developing generative AI models. In response, the Indian government has pledged to support AI startups, universities, and researchers with thousands of high-end chips, aiming to develop a homegrown language model within 10 months.

India’s AI Potential Draws Global Attention

Despite initial skepticism, OpenAI CEO Sam Altman recently acknowledged India’s potential, saying the country should play a leading role in AI development. OpenAI now ranks India as its second-largest market by user base.

Tech giants have also made significant investments in India’s AI ecosystem:

Microsoft has committed $3 billion to cloud and AI infrastructure in the country.

Nvidia CEO Jensen Huang praised India's "unmatched" technical talent as a major driver of future AI advancements.

More than 200 AI startups are currently working on generative AI applications.

India Lags in AI Investment and Research

Despite these promising developments, analysts argue that India lacks the structural foundation needed to compete with AI superpowers like the U.S. and China.

According to Stanford’s AI Vibrancy Index, which ranks countries based on patents, research, and funding, India is among the top five globally. However, in many critical areas, the gap remains significant:

Between 2010 and 2022, China and the U.S. accounted for 60% and 20% of global AI patents, respectively, while India secured less than 0.5%.

In 2023, Indian AI startups received only a fraction of the private investment that U.S. and Chinese companies attracted.

India’s state-funded AI mission is worth $1 billion—a stark contrast to the $500 billion Stargate initiative in the U.S. and China’s reported $137 billion AI development plan.

Challenges in AI Development

India’s potential is evident in its talent pool—15% of the world’s AI workforce is Indian. However, a significant portion of this talent chooses to work abroad, particularly in the U.S., due to limited research opportunities at home.

Other key challenges include:

Lack of high-quality, India-specific datasets required for training AI models in regional languages such as Hindi, Marathi, and Tamil.

Short-term investment mindset, with limited long-term funding from both the government and private sector.

Weak research infrastructure, as foundational AI innovations typically emerge from deep R&D in universities and corporate research labs—an area where India still lags.

Lessons from India’s Digital Payments Success

Despite these hurdles, India has successfully led technological revolutions before. The country’s Unified Payments Interface (UPI), developed through strong government-industry-academia collaboration, transformed digital payments and enabled millions of Indians to transact seamlessly.

AI experts argue that a similar model of collaboration is essential for India to catch up in AI. While DeepSeek’s success shows that AI breakthroughs can be achieved with lower-cost chips, India will need sustained investment, policy reforms, and a robust research ecosystem to become a true global AI leader.

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