India seeks to bolster economy with $1.24B investment for AI development

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India has approved over Rs 10,300 crore ($1.24 billion) for the IndiaAI Mission, slated over the next five years. The financial infusion aims to boost the country’s artificial intelligence (AI) ecosystem, innovation, and entrepreneurship.

The Union Cabinet, the country’s foremost decision-making body, stated that the allocation would benefit citizens and contribute to the expansion of the local economy.

This outlay aims to ensure the implementation of the IndiaAI Mission through a public-private partnership model and is expected to facilitate access to funds for AI startups. The initiative is expected to boost India’s global leadership in AI and ensure ethical and responsible AI deployment.

“This approval of over Rs 10,300 crores for the IndiaAI program will catalyze India’s AI ecosystem and position it as a force shaping the future of AI for India and for the world,” said Deputy IT Minister Rajeev Chandrasekhar.

“AI is going to be the kinetic enabler for India’s digital economy,” he added.

The allotment of funds for AI’s development is significant as India intends to leverage AI to achieve its Viksit Bharat (developed India) goal by 2047. With 1.4 billion people—almost 18% of the global population—the economy of the world’s most populous nation is expected to grow at about 8% in the current fiscal year, according to Moody’s. India also projects to be a $5 trillion economy by 2027-2028 and the world’s third-biggest economy, with emerging technologies like AI and blockchain as key catalysts.

Already, India’s richest man, Mukesh Ambani, said his Reliance Industries would complete AI transformation across all businesses in 2024 to become a global leader in AI adoption.

“Bharat embarks on the ambitious India AI Mission!” Commerce and Industry Minister Piyush Goyal said on X.

India will procure over 10,000 graphics processing units (GPUs) in a public-private partnership, which will address India’s computing capacity needs in order to develop a high-end AI ecosystem, added Goyal.

An Ernst & Young report on generative AI‘s potential to accelerate India’s digital transformation said that the nation’s future hinges on GenAI. It indicated that India could experience a substantial boost in its gross domestic product (GDP) over seven years (2023-2024 to 2029-2030). GenAI’s cumulative impact on GDP may range from $1.2 trillion to $1.5 trillion, contributing an additional 0.9% to 1.1% in annual CAGR (compound annual growth rate).

“A landmark day for tech and innovation! The Cabinet’s approval for the IndiaAI Mission will empower AI startups and expand access to compute infrastructure, marking a giant leap in our journey towards becoming a global leader in AI innovation,” Prime Minister Narendra Modi said on X.

Earlier this month, India issued an advisory asking “large” companies using AI tools or GenAI models to get government approval before rolling it out to the public. The advisory, however, does not apply to startup enterprises, considering India now has over 1,00,000 startups and 113 unicorns, with the potential to add 10,00,000 startups and 10,000 unicorns in the coming decade.

India is also expected to release a draft regulatory framework for AI by July to use the technology for economic growth while setting up guardrails to prevent misuse.

Additionally, to boost India’s digital economy, Finance Minister Nirmala Sitharaman, while presenting Budget 2024-25 on February 1—the last one before elections this year— said that a corpus of Rs 1 trillion ($12.08 billion) will be established with a 50-year interest-free loan. The corpus will provide long-term financing or refinancing with long tenors and low or nil interest rates.

“For our tech-savvy youth, this will be a golden era,” Sitharaman said.

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