Union Budget 2025 | Strategic blueprint for AI leadership balancing: Innovation with sustainability and inclusivity

By Rakesh Kaul Punjabi,

Artificial Intelligence (AI) is reshaping economies worldwide, offering immense potential for innovation, governance transformation, and economic growth. However, its rapid development poses challenges, including environmental impacts and financial demands, that India can address strategically. The Union Budget 2025 provides a critical opportunity for India to position itself as a global AI leader by prioritizing sustainability, fostering public-private partnerships, focusing on AI infused Governance and service delivery, enhancing innovation through research, skills development, and startup support. 

Balancing AI’s energy demands with sustainability 

AI systems, particularly large-scale models, require vast amounts of energy. India’s electricity production, heavily reliant on fossil fuels (90%), contributes to annual carbon emissions of 2.65 billion metric tons. As the demand for AI infrastructure grows, balancing technological progress with sustainability becomes critical. 

The Budget may look towards allocating resources for nuclear/renewable-powered data center clusters, leveraging India’s renewable energy targets—450 GW by 2030—to reduce the carbon footprint of AI systems. By incentivizing green infrastructure development, India can ensure AI growth aligns with global climate commitments, driving both innovation and environmental stewardship. Government may also look at introducing zero-emission zones and offer fiscal incentives to data centers operating within such zones. 

Upskilling India’s workforce for an AI economy 

By 2025, India will have the world’s largest young workforce, with 65% of its population under 35. Yet, according to the World Economic Forum, 54% of workers globally will require reskilling to remain relevant in an AI-driven world. 

The Budget may look at expanding AI training programs under initiatives like Pradhan Mantri Kaushal Vikas Yojana, focusing on underserved communities. By integrating AI literacy into educational curricula, as outlined in the National Education Policy 2020, India can bridge the skills gap and prepare its workforce for future opportunities, ensuring demographic advantages translate into economic gains. 

Bharat AI governance plan 

Countries like Singapore and Estonia showcase how AI enhances governance through citizen-centric services and data-driven policymaking. India’s National Center for Artificial Intelligence is a significant first step, but scaling such efforts is imperative  

The Budget may look at creating a ‘Bharat AI Governance Plan’ on the lines of National E-Governance Plan, wherein AI-MMPs for the identified priority sectors may be created. The budgetary support of these AI-MMPs would drive adoption in the priority sectors and enable improving service delivery and decision-making, while solidifying India’s position as a leader in AI innovation. This would also provide a fillip to the private sector investment in AI. 

Nurturing startups through AI-specific incubators 

India’s startup ecosystem has grown with over 500 incubators nationwide, supported by initiatives like Atal Innovation Mission. However, AI-specific incubators remain underdeveloped, limiting startups’ ability to tackle India-centric challenges. 

The Budget can look towards allocating funds for AI-focused incubation centers that offer mentorship, grants, and resources to startups working on solutions for agriculture, education, and healthcare. By nurturing AI entrepreneurs, India can create transformative solutions that address its unique challenges while driving economic growth. 

Increasing private sector investment  

India’s startup ecosystem, with over 50,000 registered startups, attracted $11.5 billion in venture capital in 2023. Despite this progress, AI-focused investments remain limited, leaving a gap in funding high-impact projects. 

The Government of India can consider initiatives like a Lab that can identify barriers and solutions for increasing private sector investment and various PPP solutions.   

The Union Budget 2025 presents a pivotal opportunity to build a sustainable, inclusive AI economy.

With strategic investments and clear policy direction, India can ensure that AI serves not only as a tool for economic growth but also to create a more equitable and sustainable future.

Author Rakesh Kaul Punjabi is Partner and AI Activation Leader with EY India.

Views expressed are his own and not necessarily those of financialexpress.com