In the high stakes In the race for supremacy in the burgeoning realm of generative AI, India’s vibrant technology ecosystem faces an uphill battle to overtake the world’s leaders. Despite being home to one of the world’s largest startup ecosystems, the South Asian economy has yet to make a material impact in the rapidly advancing AI arena.
No native Indian contenders have emerged to challenge the dominance of major language model titans like OpenAI’s ChatGPT, Google Ventures-backed Anthropic, or Google’s Bard. “Although there are more than 1,500 AI-based startups in India with more than $4 billion in funding, India is still losing the AI innovation battle,” Sanford C. Bernstein analysts said.
To its credit, many of India’s major startups are using machine learning to improve aspects of their business operations. For example, e-commerce giant Flipkart uses machine learning to fine-tune customer shopping experiences, while Razorpay uses AI to fight payment fraud. Online tutoring platform Vedantu has recently integrated AI into its live lessons, making them more accessible and affordable.
Industry insiders attribute India’s lack of AI startups in part to a skills gap among the country’s workforce. Now the advent of generative AI could displace many service jobs, analysts warn.
“Among the more than 5 million employees, IT in India still has a high mix of low-end employees such as BPO or system maintenance. While AI is not yet at the level to cause disruptions, the systems are improving rapidly (our question on ChatGPT yielded a more evolved answer within a few days), said Bernstein analysts.
Dev Khare, a partner at Lightspeed Venture Partners India, recently assessed the disruptive potential of AI and warned that jobs and processes in industries such as market research, content production, legal analytics, financial analytics, and various jobs in IT services could be impacted.
For India, however, this disruption also presents an opportunity. Rapid profits in the agricultural sector, which employs more than 40% of the country’s workforce, is challenging, and similarly automation in manufacturing may be unnecessary due to the abundant and affordable workforce.
With timely upskilling and resource optimization, the service sector will benefit most and boost productivity. Giant Indian consulting giants are already recognizing it. For example, Infosys revealed last month that it is working on several generative AI projects to address specific aspects of clients’ businesses. TCS, on the other hand, explores cross-industry solutions to automate code generation, content creation, copywriting, and marketing.
In response to this landscape, New Delhi has stated that India will not regulate the growth of AI and will take a different approach than many other countries.
“AI is a kinetic enabler of the digital economy and innovation ecosystem. The government is leveraging the potential of AI to provide personalized and interactive citizen-centric services through digital public platforms,” India’s Ministry of Electronics and IT said last month.
Shine from home
As the more established segment of India’s startup ecosystem has yet to make a major leap in the generative AI race, young companies are jumping at this opportunity.
A new generation of entrepreneurs is responding to the enthusiasm surrounding generative AI technologies. Startups like Gan, which enables companies to reuse videos at scale, TrueFoundry, which helps build ChatGPT with proprietary data, and Cube, which enables AI-powered customer support on social media, are among the frontrunners.
The huge interest has driven almost all venture capital funds in India to develop investment strategies in the emerging space.
Anandamoy Roychowdhary, Partner at Surge, Sequoia India & Southeast Asia, pushed back that Indian startups have just started exploring applications around generative AI, saying several have been working in this space for many years.
“However, what cannot be denied is the spectacular pace of projects and startup creation following ChatGPT’s launch. The Sequoia India and SEA team were aware of this trend early and have collaborated with 7-8 AI companies in previous Surge cohorts,” he told TechCrunch.
Sequoia India and SEA evaluate at least five companies in this space each week, he said.
Accel, another high-profile venture firm that has been operating in India for more than a decade, said on Wednesday that AI is one of two key themes in the new cohort of its early-stage venture program.
However, some founders expressed concern that these AI startups are unlikely to focus on creating their own large language models due to the lack of funding and investor persuasion to support such high computing and other infrastructure costs.