India’s AI ambitions are putting it on the world map, its AI talent in the limelight

Nov 30, 2023

India, the land famous for giving the world Hinduism and Buddhism, wandering sadhus, and the Taj Mahal, has also become a top AI player. According to Tortoise Media, the country is now in the top 15 overall, fifth in Scale (“absolute” AI capacity) and second in Talent after the US (the total number of individuals skilled in AI).

At the same time, other sources, including the AI Index Report 2022 from Stanford, stipulate that India is already number one in the world by AI skill penetration rate – a slightly different metric that measures the proportion of the workforce with AI skills relative to its total workforce. In essence, this implies that while the US may lead in the sheer volume of AI talent, India excels in the widespread acquisition and application of AI skills, indicating a broader and more evenly distributed AI skill set across its working population.

Why is Indian AI talent flourishing?

According to the AIM Research report, around 4-5% of all professionals working for medium to large Indian enterprises are now involved in AI, over 70% of all professionals working in AI-related jobs can interface with databases through languages like SQL, and around 75% of Indian AI companies have already adopted deep learning. Such impressive stats are likely to be the result of these factors:

Extensive IT services industry: India’s long-standing role as a global IT services hub has created a vast pool of technical talent. The country’s ongoing focus on delivering tech solutions worldwide – often in the form of outsourcing for clients and end users based elsewhere – has naturally evolved into a strong foundation in AI skills.
Workforce versatility: Indian professionals have shown a high degree of adaptability and willingness to learn emerging technologies in order to stay competitive. According to Bloomberg, Indian employers often double salaries to lure in promising AI talent. This is also helped by the fact that India has a large urban English-speaking population.
Rapid upskilling initiatives: Indian companies have been proactive in upskilling and reskilling their workforce. According to a recent LinkedIn report, most of these training programs, online courses, and bootcamps focus on hands-on ML skills and customer-facing aspects of AI, as opposed to academic research or expensive deep tech.

Promising projections

Based on the findings of two research studies published by Forbes Advisor, the AI market size in India (i.e., the total revenue generated by the AI sector) reached $680 million in 2022. It’s expected to climb higher, to almost $4 billion by 2028, showcasing a CAGR (Compound Annual Growth Rate) of 33% between 2023 and 2028 (IMARC Group). At the same time, the AI expenditure in the country (i.e., the total amount of money spent on AI) is believed to continue rising at a CAGR of 40%, reaching close to $12 billion by 2025 (India Brand Equity Foundation).

These figures appear to tell us that the investment in AI in India is currently outpacing the revenue generated from AI products and services. Granted, this is not that unusual a trend across the globe since most AI ventures – and tech startups in general – ultimately fail to become profitable. Be that as it may, other sources, including AIM Research, claim that the AI-generated revenue in India tipped over $12 billion last year, implying that the country is breaking even on its AI investment already.

Whichever the interpretation (that we can neither confirm nor deny), India is definitely turning heads. Based on the research data from Georgetown’s CSET, India has consistently appeared in the world’s top five nations by the number of AI-relevant scholarly papers, concurrently producing “almost twice as many master’s level engineering graduates as the US,” despite lagging behind China in the same category.

It’s not all sunshine and lollipops

While India is undoubtedly reinventing itself as a global center of AI dominance, the current situation is not without its share of glaring problems. One of the major factors is India’s low scores in the Intensity and Infrastructure metrics, neither of which places India in the world’s top 50, consequently lowering the country’s overall rating.

Intensity measures a nation’s AI capacity relative to the size of that country’s economy. So, while India may have a relatively strong AI prowess overall, evidenced by a high percentage of skilled AI practitioners, other Indian industries (e.g., pharmaceuticals) generate larger revenues, thereby enjoying a stronger competitive edge. This is intertwined with India’s poor Infrastructure, stemming from the country’s limited domestic resources to support many AI projects from start to finish.

One possible explanation is that India’s AI efforts in the private sector are focused predominantly on a handful of AI subsegments, which means there are blind spots within the landscape. Another plausible reason is that India (in contrast to AI nations like South Korea) lacks a domestic manufacturing capacity to produce memory chips, which are crucial for AI data processing and storage. In fact, it’s only this year that the very first Indian company has emerged to try and change that.

Indian AI ecosystem

In spite of these challenges (which may yet be overcome in the coming years), Indian companies have been vigorously equipping themselves with AI technologies. For instance, the 2022 Survey from the Economic Times claims that the number of tech startups in India – many of them AI-related – has grown more than 20 times in the past five years, with 555 districts in India (against the total of 766 in the country) having at least one new registered tech startup.

Quite tellingly, because of the country’s history in the IT services industry, a lot of AI in India seems to be about generative AI or AI-as-a-service in support of other businesses (as opposed to ML-backed robotics that we see in China or Japan). According to several reports, including Nasscom and McKinsey and SaaSBoomi, as of this year, India’s generative AI ecosystem boasts 60 registered companies. Furthemore, the number of AI-driven SaaS (Software-as-a-Service) products in India has more than doubled in the last two years, securing almost $600 million in funding, spurred by the surging interest in ChatGPT-like tools.

Some of these reports also estimate the total contribution of AI-related companies to India’s GDP (i.e., enterprises assisted by AI from across all sectors) to reach $90-95 billion by 2025. According to the reports published on OECD’s website, the AI industry in India is likely to add a staggering $970 billion to the country’s GDP by 2035.

Noteworthy AI startups

In line with this, India has produced numerous AI startups to date, each targeting different sectors with their creative solutions. Conversational AI and NLP (Natural Language Processing), being a speech-centered subset of generative AI – traceable to India’s track record in IT services – is a clear leitmotif within the country’s AI ecosystem:

Yellow: Based in California, with roots in India, the company offers a conversational AI platform for on-demand consumer interaction in various languages, catering to multiple sectors.
Avaamo: With a strong Indian influence in its founding team, this company specializes in providing personalized assistance in healthcare, banking, education, and procurement.
Gnani: An Indian startup that develops voice assistants and analytics products, with its speech-to-text engine supporting multiple Indian languages.
Devnagri and Reverie – two up-and-coming Indian startups, offering AI-powered translation and localization services.

The second most popular AI subsector among Indian startups is agriculture and aquaculture (e.g., Cropin and Aquaconnect). Incidentally, it’s also worth pointing out that many companies in the US that develop and market AI, including Big Tech, are headed by Indian-born engineers and executives. Among them are Sunder Pichai (CEO of Google), Satya Nadella (CEO of Microsoft), and Arvind Krishna (CEO of IBM).

The government is onboard

India’s government, under the Ministry of Electronics and IT, is also pioneering digital transformation with initiatives like the National AI and Semiconductor portals. These efforts are part of a broader strategy to embed digital technologies into inclusive development, leveraging India’s extensive internet access and affordable data.

Central to these efforts are AI-driven solutions addressing long-standing challenges. The government’s notable achievements include Aadhar, the world’s largest biometric ID system, which streamlines identity verification using AI. Similarly, the Unified Payments Interface (UPI) revolutionizes digital transactions, integrating AI for enhanced usability and security.

Digital paperwork management is another area of focus, with DigiLocker providing cloud-based, AI-enabled authentication for documents with PII. Further innovations at the state level include Tamil Nadu’s E-Paarvai and Uzhavan apps, which leverage AI for healthcare (cataract detection) and farming (pest infestation diagnosis) respectively.

Matching the private sector’s performance, a significant portion of the Indian government’s AI efforts have been in language technology (NLP). One notable example is the use of Samanantar by the Supreme Court for document translation. This AI tool, developed at IIT Madras, offers digital accessibility in multiple Indian languages, including Hindi, Punjabi, and Urdu.

A nation on the rise

India is clearly gaining momentum in AI, evidenced by a surge of forward-thinking businesses receiving substantial investments and developing transformative technologies. This is particularly notable in areas such as conversational AI, which contribute to optimistic AI-fueled GDP projections and bolster India’s global lead in AI skill penetration.

Nevertheless, challenges remain, especially in terms of India’s low domestic capacity for memory chip production and other infrastructural elements critical for supporting AI projects. With that said, the government’s initiatives are attempting to change that. Not only has the Indian state been reinforcing the private sector’s efforts in AI-driven language technology, but it’s also been demonstrating commitment to harnessing AI for societal advancement and digital inclusivity.