India’s AI ambition grows, but research gaps & job risks loom

Artificial Intelligence (AI) could add up to 1.3% to India’s gross domestic product (GDP) by 2035, according to a report by Acuité Ratings & Research. This growth potential mirrors global trends where countries are leveraging AI to accelerate productivity—such as Singapore, which has integrated AI into public transport and healthcare to boost efficiency.

However, the report warns that while AI adoption can boost the economy, it may also displace millions of routine jobs, especially without reskilling initiatives.

India Lags in AI Research Despite Strong Investments

Although India received $1.4 Bn in private AI investment in 2023, placing it 10th globally, its research output is lagging, accounting for only about 9% of global AI publications. This is significantly behind China (about 23%) and the United States (about 15%).

Most AI research in India is driven by a handful of institutions like IIT Bombay, IIT Delhi, IIT Madras, IISc, and IIITs. In contrast, Stanford University in the US and Tsinghua University in China have become global AI research hubs, contributing significantly to their respective countries' dominance.

Government’s Response: India AI Mission Launched in 2024

In an initiative to position India as a global leader in AI, the central government launched the India AI Mission last year, backed by a budget of Rs 10,300 Crore (about $1.25 Bn) over a five-year period. This mission represents a strategic policy push aimed at unlocking the transformative potential of AI across sectors—similar in ambition to global programmes like the EU’s Digital Europe Programme and China’s AI Strategic Plan. The India AI Mission is designed around three core objectives:

• Strengthening National AI Infrastructure: The mission seeks to build a robust AI computing ecosystem to support both research and commercial applications. This includes establishing high-performance computing (HPC) facilities, also known as AI supercomputers; creating shared data repositories and AI testbeds for startups and researchers; enabling access to cloud computing platforms for AI model training and deployment.

These efforts aim to overcome one of India’s major bottlenecks—limited access to compute resources, especially outside major tech hubs like Bengaluru or Hyderabad.

• Promoting Research & Innovation: To boost India's relatively low contribution to global AI research (currently only 9.2% of AI publications), the mission would fund AI Centers of Excellence (CoEs) in leading institutions, such as IITs, IISc, and IIITs; support industry-academia collaborations to turn academic research into real-world applications and encourage the development of indigenous AI tools and datasets, particularly in Indian languages and for sectors like agriculture, healthcare, and governance.

This aligns with the goal of reducing dependence on foreign AI models and creating India-specific solutions.

• Developing a Skilled AI Workforce: Recognising that AI-driven automation could displace millions of jobs, the mission places strong emphasis on reskilling and upskilling that includes launching AI skilling programmes targeting students, professionals, and public sector employees; partnering with tech companies to offer AI certification courses and embedding AI modules into STEM education at schools and colleges.

The mission hopes to prepare India’s demographic young population for emerging roles such as AI engineers, data scientists, prompt engineers, and AI ethicists.

Automation Threat: 40% Work Hours May Be Affected by 2030

According to Sankar Chakraborti, MD & CEO of Acuité Ratings and Research, about 40% of working hours could be automated by 2030, threatening jobs in sectors like customer support, retail, and logistics. Global companies like Amazon and Walmart have already deployed AI and robotics to handle warehouse operations, reducing manual labour.

Chakraborti emphasised that India must see this disruption as an opportunity to create AI-driven roles and invest heavily in reskilling and upskilling its workforce.

Urban-Centric AI Ecosystems May Widen Rural Divide

The report notes that AI development is concentrated in metropolitan hubs, potentially widening the urban-rural divide. Most AI startups and innovation clusters are based in cities like Bengaluru, Hyderabad, and Mumbai, with limited outreach to smaller towns and rural areas.

This urban bias risks leaving behind a significant portion of India's youthful and rural population, unless policies are designed to promote inclusive AI adoption.

Digital Infrastructure: India’s Strength in Scaling AI

India’s strong digital foundation offers a massive opportunity for scaling AI:

• 796 Mn mobile internet users

• 16.4 GB/month per user data consumption (highest globally)

• Nationwide digital platforms like Aadhaar (covering 99% of adults) and UPI, which is growing at 46% year-on-year

This positions India favourably for AI rollout across sectors such as e-governance, healthcare, and financial inclusion. For example, AI-driven chatbots integrated with UPI are already being tested for seamless digital payments in rural areas.

Cost Advantage: India Offers 40–50% Lower AI Development Costs

India has a key competitive edge with AI development costs 40–50% lower than in the US or Europe. This makes it an attractive destination for global firms seeking affordable innovation hubs.

Tech giants like Google and Microsoft have already invested in expanding their AI operations in India. Microsoft’s AI Centre of Excellence in Hyderabad, for instance, supports regional innovation while tapping into India's vast talent pool.

Looking Ahead: Education & Skilling Are Critical

To fully leverage AI’s economic promise, India must invest in AI-specific education and training. Introducing AI curriculum in engineering colleges, setting up AI research parks, and promoting public-private partnerships will be key.

Similar models can be seen in Germany, where vocational training in industry technologies has helped reduce the impact of automation.

India stands at a critical juncture. With the right mix of investment, research expansion, inclusive development, and workforce readiness, it can not only harness AI for growth but also become a global leader in ethical and scalable AI deployment.