Two areas where there have been expectations for deep investments by the government are deeptech and AI. While good policy announcements have been made in the past year, the action on the ground and the approach to funding have yet to generate any real outcomes.
There have been concerns raised that Indian investments in AI have fallen far short of the leaders, USA and China. The numbers bear out this concern with India’s overall investment announcements in AI of over $11 billion substantially lower than the figures of over $470 billion in the US and nearly $120 billion in China.
As the Economic Survey noted, India has chosen a different path from building large scale AI models, focusing on a bottom-up approach to developing narrow and frugal purpose-driven AI systems designed to solve local problems.
India’s Strategic Position
This approach cannot be faulted, which is endorsed by Stanford University ranking India as third in the world for AI capability in their Global AI Vibrancy Index 2025.
Without getting too technical, in the value pyramid of AI, India is positioned as top tier in the application layer which includes AI applications in vertical domains and software as a service (SaaS), and second tier in the infrastructure layer with significant investments in cloud and data centres.
In the other three layers – model, chip and energy, India is not a big investor and there is no case for a country with lower investment capability than others to replicate an Nvidia or Open AI kind of approach.
In simple terms, what the industry was expecting from the budget was more investments in an AI architecture and ecosystem where some foundational models could be developed with government participation, so that applications and models could proliferate.
Sovereign AI Architecture
The National AI Mission which the country has announced has still to announce a national intelligence architecture and long-term roadmap.
While investments in GPUs and India’s LLM are happening, investment in a sovereign AI stack embedded in the digital public infrastructure has been talked about but needs investments akin to the space or nuclear missions for India to be truly deeptech and AI competitive!
In this context, the government’s support to “new technologies including AI” and the new high-powered standing committee for services, which has technology and AI impact in its mandate raise hopes that there will be robust recommendations that will help all companies in the services sector including IT services.
Tax Incentives Provided
The “safe harbour” for the IT services group has been enhanced which should help all GCCs. It is good that the tax holiday on global cloud services providers and data centre companies providing services to global customers have been exempted from tax all the way up to 2047.
In addition, non-resident experts staying for five years can also avail tax exemptions under the appropriate scheme. This should encourage more individuals and companies from outside India to set up and expand the solutions they develop in India and provide both to global and local customers.
The direction is right and the chosen areas for government investment are excellent. The good news is that digital technologies, AI enablement and e-commerce are being embedded in most initiatives of the government to enhance customer satisfaction and ease of doing business.
The assumption seems to be that domestic tech industry is now well established and does not need further government support beyond what is already available. The industry needs to accept that the AI environment will be positive but there are no big bang investments that will be made centrally.
The onus is on industry to move on and build new models and applications that will retain our position as top providers of technology innovations including AI.
(The author is Chairman at 5F World & GTT Data Solutions)
Disclaimer: The views expressed are the author’s own and do not reflect the official policy or position of Financial Express.