Awake, Arise, AI: India’s Blueprint for AI

AI Chips meets AI Chops 

India’s Union Budget 2025-26 signals a serious commitment to leading the AI revolution, with a strategic focus that goes well beyond software innovation. The government’s allocation of ₹500 crore for a Centre of Excellence in AI for education is designed to ignite indigenous research, comprehensive training, and robust skill development. This investment is complemented by ambitious plans to expand technical education—for example, the IITs are set to add thousands of new seats in the coming years. These measures are not just about building indigenous software or foundational models; they are a full-throttle push to build the essential hardware and digital infrastructure that underpin a modern AI ecosystem. In doing so, India is positioning itself as a critical player in its broader digital transformation strategy—one that aims to rejuvenate traditional industries, enhance public services, and drive sustainable economic growth. 

Ingenuity trumps Investment 

The international AI landscape has been rocked by disruptive innovations, and India is keenly observing these trends. Chinese startup DeepSeek’s R1 model, which claims to achieve high performance at a fraction of the cost of its Western counterparts, has been hailed as “AI’s Sputnik moment.” U.S. leaders including President Trump have described its emergence as a “wake-up call” for American tech firms that have long relied on hefty investments in state-of-the-art hardware.

Such global developments underscore the need for a more efficient, cost-effective approach to AI—a notion that resonates with India’s own ambitions. If India’s accomplishments in space tech & nuclear tech have taught us anything at all, it is that we’re eminently capable of making up for INR with ingenuity. Recent high-level meetings between OpenAI’s Sam Altman and Indian officials, including IT Minister Ashwini Vaishnaw, have underscored the mutual benefits of collaborating on a low-cost, high-efficiency AI infrastructure. This type of public-private partnership is essential, as it not only drives technological innovation but also helps foster a startup ecosystem that can challenge conventional approaches and lead to breakthrough solutions. 

Securing AI Sovereignty 

One of the critical takeaways for India is the importance of developing domestic semiconductor manufacturing and hardware production capabilities. In today’s global environment, where supply chain disruptions and export restrictions on advanced chips are an ever-present challenge, reducing dependence on imported technology is key. By ramping up investments in local chip production, India can secure the hardware necessary to power its AI initiatives. Securing AI sovereignty is as much about expanding and elevating education.

Measures such as the significant boost in IIT seats ensure that a new generation of tech talent is ready to tackle emerging challenges. Initiatives aimed at upskilling millions of Indians in AI and related fields will not only help bridge the talent gap but also prevent brain drain, ultimately laying a strong foundation for sustainable innovation. This dual focus on hardware and human capital is exactly what India needs to turn its vast demographic potential into a competitive edge in the global AI race. 

Rapid but Responsible 

As India accelerates its AI ambitions, it must also navigate complex regulatory landscapes and address pressing data privacy concerns. Balancing rapid technological advancement with robust ethical and legal frameworks is crucial. India has an opportunity to craft policies that encourage innovation while protecting citizens’ data and ensuring transparency in AI applications.

The Digital Personal Data Protection (DPDP) Act plays a crucial role in this landscape, setting a framework for responsible AI development by regulating how personal data is processed, stored, and shared. Strengthening compliance with DPDP will ensure that India's AI ecosystem develops in a way that prioritizes privacy, fairness, and accountability. This might include establishing clear guidelines for data usage, bolstering cybersecurity protocols, and ensuring that domestic AI applications adhere to high standards of ethics and accountability. In doing so, India not only safeguards its digital infrastructure but also sets itself up as a model for other emerging economies facing similar challenges. 

Execution is Everything 

The balanced mix of heavy investments in infrastructure, strategic public-private partnerships, and a strong emphasis on nurturing talent are all steps in the right direction as we head into the next phase of the global AI revolution. The country’s new AI blueprint, shaped by both domestic priorities and lessons learned from international innovators, offers a comprehensive roadmap that spans from hardware production and regulatory frameworks to educational reforms and international collaborations. The dint now lies in execution, which requires not just the government but also India Inc. to act with courage and conviction.

-By Hari Balaji, Technology Partner, EY India