India scrambles to secure its place in US-China AI race, post-DeepSeek

With the US and China racing ahead, India grapples with the challenge of innovation and investment in artificial intelligence

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A DeepSeek AI sign is seen at a building where the Chinese start-up’s office is located in Beijing. Photo: Reuters

Published: 5:00pm, 23 Feb 2025

For decades, India’s IT powerhouses have churned out code and talent that fuelled the world’s technological revolution. But with artificial intelligence poised to upend the very foundation of software services, can the world’s largest outsourcing hub pivot to an AI-driven future before it’s too late?

The challenge is urgent. Chinese start-up DeepSeek has emerged as a formidable competitor to Western tech dominance with its cost-effective, open-source AI models. Industry voices say India must now seize this moment to reimagine its technological ecosystem or risk being left in the United States and China’s wake.

“While software services have long been the backbone of digital transformation, AI’s ability to automate complex processes, enhance decision-making and create new revenue streams, among a host of other benefits, is compelling forward-looking organisations to recalibrate their focus,” said Raj Kapoor, founder and chairman of India Blockchain Alliance.

A recent International Monetary Fund report warned that nearly 40 per cent jobs worldwide could be affected by AI. Meanwhile, the global software-services market – in which India holds a commanding 44 per cent share, according to New Delhi – faces slowing growth, with an annual expansion rate projected at 11.9 per cent through 2028.

By contrast, AI is set to grow at a staggering 37.3 per cent annually between 2024 and 2030, according to data cited by Kapoor.

Indian Prime Minister Narendra Modi listens to during the closing session of a forum on artificial intelligence in Paris on February 11. Photo: AFP

India’s leaders are aware of the stakes. Last March, the government launched the US$1.25 billion “IndiaAI Mission” to nurture start-ups and build infrastructure. A modest US$575,000 allocation in the latest federal budget is also aimed at establishing three AI education centres focused on research. And IT minister Ashwini Vaishnaw said in January that India’s foundational AI model, customised for its diverse cultural and linguistic needs, could be ready within months.

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