By Suhaib Bakshi
bakshisuhaib094@gmail.com
Artificial intelligence is rapidly emerging as one of the most consequential technologies shaping the global economy. For India, the central challenge is not only how to develop advanced AI systems but also how to ensure that the technology contributes meaningfully to economic growth, productivity and public services.
Much of the global conversation around artificial intelligence has focused on the race to build ever larger frontier models, with major advances coming from countries such as the United States and China. These countries have invested heavily in computing power, advanced semiconductors and research to push the technological frontier. American technology companies have led the development of cutting-edge AI models and cloud platforms, while China has pursued a state-driven strategy aimed at integrating artificial intelligence into manufacturing, urban governance and digital services.
Yet the long-term impact of artificial intelligence may depend not only on breakthroughs at the technological frontier but also on how effectively the technology is deployed across real-world systems.
India appears to be pursuing a distinctive approach in this next phase of the AI revolution. Rather than focusing solely on competing in frontier-model development, the country is investing in the broader ecosystem that enables artificial intelligence to diffuse across industries and society. This reflects an understanding that the economic value of AI will ultimately depend on how widely and productively it is adopted.
One pillar of this approach is semiconductor development. India has expanded support for domestic chip manufacturing through the India Semiconductor Mission. In the Union Budget 2026–27, the modified programme for developing the semiconductor and display manufacturing ecosystem carries an outlay of ₹8,000 crore (about $1bn), signalling continued efforts to strengthen domestic capabilities across the chip value chain and reduce long-term dependence on external supply chains.
Several major projects illustrate this effort. Micron Technology opened its semiconductor assembly and test facility in Sanand, Gujarat, in February 2026. The company described the site as part of a combined investment of about $2.75bn by Micron and its government partners. Once fully ramped, the first phase is expected to include more than 500,000 square feet of cleanroom space, making it one of the world’s largest single-floor assembly-and-test cleanrooms. Micron has also confirmed that the facility has begun commercial production and that its first shipment of made-in-India memory modules has been delivered to Dell Technologies.
Tata Electronics is also developing a semiconductor fabrication plant in Dholera in partnership with Taiwan’s Powerchip Semiconductor Manufacturing Corporation. The project, with an investment of ₹91,000 crore (about $11bn), is expected to manufacture chips across technology nodes ranging from 28nm to 110nm for applications including power-management integrated circuits, display drivers and microcontrollers widely used in automobiles, consumer electronics and industrial systems. Although these nodes are not the most advanced globally, they remain essential for a wide range of everyday technologies.
Alongside semiconductor development, India is also expanding access to computing infrastructure. Under the IndiaAI Mission, more than 38,000 high-end GPUs have been made available through a national compute platform, with access priced at ₹65 per hour. At the India AI Impact Summit held in New Delhi in 2026, the government announced that an additional 20,000 GPUs would be added, bringing the planned capacity to more than 58,000. By lowering the cost of advanced computing, such initiatives aim to enable startups, researchers and smaller companies across India to experiment with artificial intelligence without the prohibitive infrastructure investments usually required.
India also benefits from extensive digital public infrastructure. Platforms such as Aadhaar for digital identity and the Unified Payments Interface for real-time payments already operate at enormous scale. According to data from the National Payments Corporation of India, UPI processed more than 21.7 billion transactions worth roughly ₹28.33tn (about $340bn) in January 2026 alone, making it one of the world’s largest digital payments ecosystems.
These digital platforms provide a foundation on which AI-enabled services can be built. Multilingual digital interfaces, agricultural advisory systems, healthcare applications and improved access to credit for small businesses are among the innovations that can emerge from this infrastructure. Because these systems function as open networks, they allow startups, developers and private firms to build new services on top of existing public platforms, potentially accelerating the spread of artificial intelligence across multiple sectors of the economy.
India’s scale and diversity also make it an important testing ground for practical applications of artificial intelligence. In agriculture, AI-based advisory tools can help farmers make decisions about crop selection, irrigation and pest management. In healthcare, digital platforms combined with AI diagnostics may improve access to medical services in underserved regions. Small businesses, which form a vital part of India’s economy, could benefit from AI-enabled credit assessment, logistics optimisation and digital marketplaces. These examples illustrate how artificial intelligence in India may evolve in response to practical economic needs as much as technological innovation.
India has also begun positioning itself in international discussions on responsible artificial intelligence governance. At the India AI Impact Summit in New Delhi, representatives from more than 100 countries participated in discussions on the future of artificial intelligence, reflecting growing international interest in frameworks for responsible and inclusive AI development.
The country’s long-term advantage, however, lies in its human capital. India produces one of the world’s largest pools of engineers and software developers. Translating this talent into sustained innovation will require greater investment in research and development. According to the Economic Survey 2025–26, India’s gross expenditure on R&D stands at about 0.64 per cent of GDP, well below that of several major innovation economies.
Closing this gap will depend on stronger private-sector investment, deeper collaboration between universities and industry and greater support for advanced research and entrepreneurship. Building frontier technologies and scaling their adoption are complementary challenges, and long-term success in the AI era will depend on progress in both.
India is still developing its capabilities in frontier AI models. But by strengthening semiconductor capacity, expanding access to computing infrastructure, leveraging digital public platforms and investing in talent, the country is laying the foundations for the broader adoption of artificial intelligence.
If the transformative impact of artificial intelligence ultimately depends not only on technological breakthroughs but also on how widely the technology is integrated across the economy, India’s ecosystem-oriented strategy may become one of its most important advantages in the evolving global technology landscape.
Suhaib Bakshi writes on digital infrastructure and emerging technologies.
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