India on a Mission to Set Up a Thriving AI Ecosystem

By the EMIS Insights Editorial Team

India has recently approved a USD 1.25bn investment in artificial intelligence (AI) projects in a push to claim a stake in the rapidly developing AI technology sector. The money will be used to set up computer infrastructure, help finance AI startups, and develop large language models and AI applications for the public sector.

India's AI market is seen reaching USD 17bn by 2027, growing at an annualized rate of 25%-35% between 2024 and 2027, data from India’s IT industry body Nasscom showed. The country aims to carve itself a piece of the global AI market, which is expected to reach up to USD 297.9bn by 2027, growing at a CAGR of 19.1%, data from research firm Gartner showed.

The so-called India AI Mission will be implemented through the IndiaAI Independent Business Division (IBD) under the Digital India Corporation (DIC). The mission’s goal is to set up a robust AI ecosystem through strategic partnerships between the public and private sectors. The inclusive growth of India’s AI ecosystem will be supported, among others, by democratizing computing access, improving data quality, developing indigenous AI capabilities, attracting AI talent, enabling industry collaboration, and providing startup risk capital, the Indian Ministry of Electronics and information technology said in a statement. The India AI Mission will have the following pillars: IndiaAI Compute Capacity, IndiaAI Innovation Centre, IndiaAI Datasets Platform, IndiaAI Application Development Initiative, IndiaAI FutureSkills, IndiaAI Startup Financing, and Safe & Trusted AI.

Supercomputing capacity, including over 10,000 graphics processing units, will be provided to stakeholders to help set up a thriving AI ecosystem, the New Indian Express reported.

The investment "will catalyze India's AI ecosystem and position it as a force shaping the future of AI for India and for the world," junior minister Rajeev Chandrasekhar said as cited by the Hindustan Times. The private sector is expected to match the government investment pledge, Chandrasekhar later said in an interview with MoneyControl in May 2024.

According to a report by the International Data Corporation (IDC), AI adoption, which includes software, services, and hardware, will result in raising India’s AI spending to USD 6bn by 2027. The IDC’s forecasts for global AI spending are even more optimistic, with the corporation expecting them to exceed USD 512bn by 2027.

Private investment in AI in India stood at USD 1.39bn in 2023, ranking it tenth in the world, data from Stanford University’s Artificial Intelligence Index Report 2024 showed. The aggregated private investment in 2013-2023 amounted to USD 9.85bn. In the period 2015-2023, India had the highest AI skill penetration rate globally, the Stanford report also showed. Although the global overall AI private investment declined in 2023, funding for generative AI skyrocketed, increasing eightfold y/y to reach USD 25.2bn. As of 2023, the biggest share of GitHub AI projects globally were located in the US, accounting for 22.9% of contributions. India came second with a share of 19%.

India also ranks second in the world for AI adoption, with 58% of respondents utilizing artificial intelligence for code optimization, the Palo Alto Networks Survey cited by the AI Mission portal, India AI, revealed.

Although India's startup ecosystem has been going through a funding winter for a while, the AI technology segment still managed to attract attention and capital from venture capitalists and institutional investors, Entrepreneur India reported in May 2024. According to the website, India's AI funding dropped from USD 14.7mn in 2022 to USD 7.1mn in 2023, however, the segment is still going strong, having raised USD 10.6mn till May 3, 2024.

The biggest fundraiser in the first quarter of 2024 was that of Bhavish Agarwal's Krutrim, worth USD 50mn. Krutrim is led by Ola founder Bhavish Aggarwal and is India’s first unicorn AI startup, valued at USD 1bn. Krutrim is building a large language model (LLM) based on Indian languages and English.

Other significant funding activities in the period included PineGap.ai founders Deepak Sharma and Ankit Varmani’s raising USD 2.5mn in seed funding from US-based investors SVQuad and Inventus Capital. Vodexa Generative AI SaaS raised USD 2mn from Unicorn India Ventures and Pentathlon Ventures. Highperformr attracted USD 3.5mn in seed funding from Venture Highway, Neon, and DeVC. Atlan raised USD 105mn from Singapore's sovereign wealth fund GIC along with co-investor Meritech Capital at a valuation of USD 750mn, while Myelin Foundry raised USD 4mn from the venture capital arm of the Small Industries Development Bank of India, SIDBI Venture Capital.

Among India’s biggest AI startups is Sarvam AI, founded by Vivek Raghavan and Pratyush Kumar, with total funds raised of USD 41mn. The key investors in the company are Lightspeed Venture Partners, Peak XV Partners, and Khosla Ventures.

Sarvam AI also works on LLMs based on Indian languages. Sarvam AI has partnered with Microsoft to launch voice-based AI tools and bring its Indic voice LLM to Azure.

Mad Street Den has raised a total funding of USD 67mn. The company is developing AI solutions for enterprise customers.

Wysa was founded by Jo Aggarwal and Ramakant Vempati and has raised a total of USD 25mn. Wysa is a mental health tech startup which utilizes AI to offer an “emotionally intelligent” therapist chatbot. The chatbot is used by over 6.5 million people across more than 95 countries and diverse age groups.

Mumbai-based Neysa Networks has raised USD 20mn in funding and offers a variety of generative AI platforms and services to businesses.

There’s also a multitude of up-and-coming AI startups such as Upliance AI, which brings AI to home appliances and aims to raise USD 10mn-15mn in 2025 to bolster its market presence. Scribble Data, which has already raised a total of USD 2.3mn, specializes in offering domain-specific AI assistants to large North American and European insurers to help them scale their back-end business capacity.

Bengaluru-based Expertia AI is focused on recruitment automation and is currently raising USD 3mn from its lead investor, with participation from existing investors.

Mauritius-based venture capital firm Good Capital plans to invest USD 25mn in Indian AI startups by 2025, the Business Standard reported in May 2024. The investment will come from the USD 50mn Good Capital Fund II, which is to be used by 2027. The investments will be targeted mostly at cleantech, e-commerce, edtech, healthtech, SaaS, and deeptech.

India has lucrative opportunities for AI in consumer applications, such as creating content in Indic languages, offering virtual influencers, or creating short videos and games using AI, Dev Khare, a partner at Lightspeed Venture Partners India, told TechCrunch.

It is still early days for the AI technology in India, however, the segment has been going through a robust growth phase and investors are highly optimistic about it. Given the profit potential of AI applications, investment sentiment is expected to be on an upward trend and the number of AI companies in India is seen growing.