– By Debashish Banerjee and Priyam Banerjee
The Union Budget of 2023 had created a significant push in favor of AI. As India progresses with its AI agenda, some additional considerations like ethical safeguards, upskilling and start-up policies need to be upgraded in 2024’s to maintain robust AI growth prospects.
The budget’s provisions for promoting ethical AI practices and frameworks
As AI evolves to use data like text, images, and videos to learn patterns, its learning weighs heavily on the type of data made available. Given data is not uniformly distributed over the diversity we see in the world, it is possible for AI to pick up inherent biases while training. Such biases need to be addressed with regulations. Industries like insurance and banking have incorporated guardrails in the usage of AI models long ago even before this topic became popular. For example, using racial profiles in insurance underwriting models or customer segmentation models at banks, even though highly predictive of the risk profile, won’t fly well with regulators. The GoI needs to think of similar guardrails in a structured way as follows:
Governance regulations: Creating rules for AI developers and companies which will set examples for ethical standards. In India, the Digital Personal Data Protection (DPDP) Act is a good template to address concerns regarding meaningful use of personal data. However, more such initiatives and legal barriers are needed to prevent malicious algorithms like deepfakes compromise personal identity and financial frauds.
Governance tools: Tools like model cards, which are short documents including key information about the model usage context, intention, performance evaluation and other relevant information. These need to be mandated to prevent misuse of solutions for work they are not meant for. Strong cybersecurity mechanism will also ensure ethical use of technology.
Regulatory leadership: The Government may do well to leverage help of industry veterans in India to form a regulatory body to flag inconsistent usage of AI and infringement of ethical practices.
Allaying fears of privacy concerns will positively impact the acceptance of such tools by the average citizen and encourage them to safely share data that can enhance algorithms further for targeted citizen services delivery.
The role of the budget 2023-24 in strategizing to position India as a global player in the AI industry
The AI industry is estimated to grow year-over-year at a CAGR of 30%2. India Inc. has adopted AI in various segments. The application of AI brings in 3–10X improvement in business processes2. Hence, if used effectively, the technology will have a significant contribution to India’s ambitious goals of reaching the US$ 5 trillion economy.
Opportunities are galore to improve citizen services like using AI to reduce legal case backlogs at courts, tax compliance, disease risk prediction from citizen lifestyle data, fraud detection in government schemes, using large language models (LLMs) for services and education delivery, etc. Better digital infrastructure, internet penetration, optimizing infrastructure monitoring and finance mechanisms can create credible impact from AI.
The union budget has a huge opportunity to address these by devising ways to implement PPP models with value-based impact. There is also an opportunity to focus on centralized data repositories for the country, especially in improving completeness, building trust and improving data access with the right set of controls.
Anticipation from Budget 2024-25 for AI-focused education and skill development programs
In the 2023 budget, it was recommended to set up AI CoEs in top educational institutions. In November 2023, GoI invited proposals to set these up with a significant outlay of Rs. 990 crore for 5 years, from FY 2023-24 to 2027-28. These CoEs will form crucial partnerships with industry and academia to conduct interdisciplinary research, developing cutting edge and scalable solutions especially in the areas of healthcare, agriculture, education and smart and sustainable infrastructure.
While the National Education Policy of 2020 advocates overall education spending to be 6% of GDP, in the recent past it has been close to 3%. So, there can be some improvement in allocation and take forward the AI CoE momentum built in 2023 to train more young people even in Tier-2 and 3 institutes. AI based vocational training will enable to extract the maximum potential of a rural computer literate workforce to customize language models in local Indian languages and unleash the power of Generative AI to improve citizen services through meaningful interaction.
Expectations from Budget 2024-25 to support AI startups, possibly through financial incentives and tax deduction
The government’s National DeepTech Start-up Policy (NDTSP) to stimulate innovation, spur economic growth and promote societal growth through the effective utilization of deep-tech research driven innovations was a key policy instrument for startups devised in 2023. Multiple sops via Start-up India initiative have been a boon for 119,000 DPIIT recognized start-ups.
A worsening global macroeconomic environment and tensions in 2023 have put stress on overall start-up funding but AI start-ups have managed to hold fort increasing, albeit marginally, to $1.11 billion. The same increased in Generative AI startups from $566 to $598 million1. The AI start up community will look for sops on taxes, carry-forward losses, investments and employee stock options. Encouragement from the government on AI adoption in various sectors will boost investments in AI start-ups. Also, funding for AI research via the vehicles like Startup India Seed Fund Scheme (SISFS) can generate more solutions in the Generative AI space leveraging the talent available in India. In addition, better policies to enable AI start-ups to operate from tier-2 and 3 cities will improve their margins due to favorable costs.
In conclusion, the AI industry is eager to see enough momentum in favor of AI created in the 2024 budget that enables India to move towards the centerstage of global AI leadership.
(Debashish Banerjee is the Partner; and Priyam Banerjee is the Director at Deloitte India.)
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