An emphasis on AI capability ahead of regulation should pay off by helping India’s AI ecosystem forge ahead

India’s vast market potential and exceptional talent pool have been noted globally, and about 30% of Indian companies have reportedly moved beyond pilot-phase AI initiatives, outperforming the global average of about 26%. This underscores the country’s readiness to deploy AI at scale.

This growth has been largely enabled by the government’s capacity-first approach, which aims to foster innovation through capacity building, open collaboration and a light-touch regulatory stance that encourages both local and global participation.

Initiatives such as the IndiaAI Mission have been designed to empower innovators by ensuring that the ecosystem can breathe and grow freely without being burdened by regulatory barriers that could inadvertently disadvantage Indian startups.

To sustain this momentum, India must continue to prioritize capacity building. Whether viewed from the lens of data protection, competition policy or intellectual property, India’s focus must remain on enabling innovation and empowering enterprises. Such an approach could ensure that Indian innovators are not only participants, but also leaders in shaping the global AI future.

By anchoring India’s approach to AI development in capacity creation, we set conditions that should drive India’s long-term competitiveness in this field. The IndiaAI Mission’s outlay of ₹10,372 crore reflects this commitment.

This initiative focuses on developing cutting-edge infrastructure, supporting startups and promoting the ethical and inclusive use of AI. Its plan to deploy 38,000 GPUs and establish high-performance computing facilities will give Indian researchers and entrepreneurs the tools they need to innovate at scale. Further, the creation of IndiaAI datasets and innovation hubs will make AI resources accessible to startups, academia and small businesses.

Private sector participation should amplify these efforts. Global technology leaders have reaffirmed their confidence in India’s AI vision.

Google’s proposed investment of $15 billion to establish an AI hub in Visakhapatnam, a Meta-Reliance joint venture to develop AI services, Nvidia’s partnerships with Reliance, Tata and Infosys to establish AI supercomputing infrastructure and Microsoft’s $3 billion commitment to expand AI and cloud infrastructure all point to growing confidence in India’s AI potential.

Further, startups like Sarvam AI, which raised $41 million in 2023 to build Indic-language models, exemplify the surge in indigenous capability. Together, these initiatives are creating a self-reinforcing ecosystem: one where startups can innovate, access high-performance computing and scale globally. They are also generating high skill jobs and accelerating the integration of AI across sectors ranging from agriculture and healthcare to logistics and education.

While some jurisdictions have gone in for early regulation of AI, India’s approach is measured, consultative and capacity-driven. The EU’s AI Act, though pioneering, has been criticized for its complex classification system and its regular competition interventions risk imposing compliance burdens that can impede innovation.

In contrast, India has crafted a progressive capacity-first strategy. Under the forward-looking guidance of Prime Minister Narendra Modi, the government is prioritizing enablement over enforcement, focusing on infrastructure, skills and collaboration.

Partnerships with startups, infrastructure providers and technology companies to strengthen the AI ecosystem reflects a belief that regulation should evolve alongside capability, not ahead of it.

This focus on capability development over premature regulation is attracting global investments and establishing India as a trusted technology hub. At the same time, the government is not ignoring governance challenges.

Recently, draft guidelines for AI were unveiled by the ministry of electronics and information technology that were designed to achieve a balance between guardrails and the freedom to innovate.

Amongst other initiatives, we have the Niti Aayog’s Responsible AI framework, the Competition Commission of India’s self audit framework in its competition and AI market study and the Reserve Bank of India’s Free-AI framework. All these reflect India’s focus on identifying and tackling concerns across the AI ecosystem at the onset.

India’s enabling governance frameworks sets a global example of how to balance growth with governance to achieve an AI ecosystem that is both competitive and resilient.

This offers a novel path for developing economies. It mirrors the success of India’s digital public infrastructure model, where state-led platforms like UPI, ONDC and DigiLocker enabled innovation through open and interoperable standards.

In AI, too, India’s ‘open rails’ strategy can serve as a global template for countries that want to create an enabling environment for startups while catalysing private investment across the AI value chain.

India’s model reinforces the country’s global position as a trusted AI partner for both the Global South and advanced economies. Through partnerships like the Indo-US Initiative on Critical and Emerging Technology (iCET) and UK–India AI cooperation under Vision 2035, India is capacity-building far beyond its borders too.

To conclude, India’s capacity-first approach is building confidence among investors and innovators alike, encouraging both local and foreign AI companies to partner with the government and civil society in shaping India’s AI future.

With sustained investment, visionary leadership and a collaborative spirit, we are setting the stage for an AI ecosystem that promotes innovation, inclusion and long-term competitiveness.

The author is member of the Rajya Sabha and of the Parliamentary committee on communications and information technology.