1. Introduction: The Rise of AI in India
ARTIFICIAL INTELLIGENCE (“AI”) is the new buzzword in tech circles. Nvidia CEO started this conversation by saying, “Own your own national intelligence. You cannot allow that to be done by other people.” Taking pride in owning the intelligence in the digital realm of AI implies the existence of Sovereign AI. Being an offshoot of digital sovereignty, Sovereign AI is the homegrown talent and ability of a country to build artificial intelligence using its own infrastructure to meet the demands of its local or national AI strategy.
A. AI in India’s Economic Trends
India, being one of the fastest-growing economies and a major technological hub, has a significant stake in this global era of AI. For instance, the UPI – Unified Payments Interface has effectively revolutionized all the archaic and conventional systems while smoothly incorporating AI in its conversational payment structure much to the delight of the Reserve Bank of India (“RBI”). Conversational Payments include basic UPI processes being interactive with the users through AI-powered Chatbots or voice-assistants. As of 2024, transactions worth rupees 200 trillion were done through UPI in India, as quoted by the finance minister, Mrs. Sitharaman. The incorporation of AI-oriented next-generation financial transactions has made a stellar entry in the Indian economy that seems to have a profound future significance with UPI being one such example. This is where AI and the economy marry.
B. Challenges in Leveraging AI for Economic Growth
AI is a mighty blessing to the digital world. However, several aspects need to be addressed. The Data Security Council of India (“DSCI”) has highlighted certain issues and challenges that hamper the efficient use of AI power which include adversarial attacks, data poisoning, and backdoor attacks, etc. India has two ways to efficiently utilise the AI power in economy and infrastructure to mitigate the above-mentioned challenges. Either India could rely on the private sector, i.e., let the ecosystem led by tech-giants like Google and Nvidia come up with a solution for India to establish a guardrail or India could make its own solution like in the case of UPI that is accompanied by a strict vigilance from RBI and the National Payment Corporation of India. Which option is better suited for the country? A mix of both can be a probable solution, for a country as large and diverse as India there cannot be a one-size-fits-all solution. Hence, India shall welcome interest from companies like Nvidia, merge their expertise with India’s DNA of innovation and ride the momentum generated by the AI breakthrough, because it is certainly here to stay.
Indian investors are making big bets and buying shares of companies involved in the AI space. Staying with the Nvidia example, the company makes specialised chips that power the AI app. Indian investors have poured in around Rs. 19,000 crores in this company since April 2024. Imagine Indians investing the same amount in the native AI companies. However, the reason for getting little or no investment is because the Indian AI companies have to catch up to the International AI standards since the few that exist are still newbies to the business. Meanwhile, the government abides with its duty to bless the AI and economy marital bond with legislation that vows them to eternal harmony.
2. Mapping the Regulatory Terrain: The Great AI Legislation
India is set to build an established position in the AI industry and the Indian government is dedicated to enhancing the country’s AI Innovation Ecosystem. Acknowledging the undeniable prowess of AI, India has taken a step forward in framing a regulation to combat the modern AI problems. As the Indian government pushes for “Make AI for India” and “Make AI Work for India”,it has allocated over Rs. 550 crores in the Union Budget 2024-25 for the Rs. 10,300 crores India AI Mission. This seemingly over-the-top budget is the key to unlocking the much greater treasures of AI awaiting India.
The nation’s think-tank, NITI Aayog, in its 2018’s National Strategy on Artificial Intelligence (“NSAI”) coined the “AI for All” mantra, a regulatory benchmark to ensure responsible use of AI in majorly five public sectors. This was followed by two approach papers, namely, Principles for Responsible AI and Operationalizing Principles for Responsible AI. The Indian government has issued advisories for AI companies. There are two things that stand out – first, there is a need for permission to roll out beta models. These beta models are products that are still under development. They are made public for users to give feedback to the developers as a trial run before the official launch. For instance, earlier programmes like ChatGPT could be simply released on the internet. People could access it, use it and criticise it but the Government wants tech firms to get permission first, not necessarily for all AI models. Artificial intelligence start-ups are an exception.
Second, AI models must contain disclaimers. It is a fact that AI can be unreliable and inaccurate, but the government wants AI companies to be upfront about it, like the warning labels on cigarette boxes. For instance, social media is a platform that feeds people an undeniably large amount of information but if there stands no clear authentication of these pages, the public shall remain in the dark, which is a potential blackhole of misinformation panic. This is important since India ranks first in the adoption of Generative AI technology across the Asia Pacific. Further, this shall have far-reaching implications on the AI landscape because most companies abhor regulations since it slows down innovation.
So, the fear is what if the same happens to India’s AI industry? The rules might scare investors. What if it discourages talent? These are genuine concerns among industry leaders. Such concerns have been addressed by Jaijit Bhattacharya, president of Centre for Digital Economy Policy Research (“C-DEP”) where he says “This advisory does not really hinder the industry. It stays away from dictating what algorithm to use or hounding the start-ups to provide ‘explainability’ or ‘transparency’ of their algorithms.” It is pertinent to observe that this has been asserted in a mere advisory capacity.
Talking about companies, the advancement shown by social media companies like WhatsApp, Instagram and Facebook to integrate AI is commendable but the lack of enforceable laws to regulate this is condemnable. The government taking its sweet merry time while releasing advisories and guidelines is just a game of catch-up. The Digital India Act was set to be released for public scrutiny in July 2024. A good guess would be no see, no scrutiny. The Digital Personal Data Protection Act has not yet been enforced. With such delay, the government will find it difficult to catch up with the tech-giants who can be notorious with such unbridled AI technology. It might lead to another era of looting in India, this time the modern-day gold, i.e., Big Data in the Economy. In essence, there is a long way to go given the dynamic nature of the Indian Economy coupled with the unchecked AI power.
3. Balancing Innovation and Regulation: The Need for Sustainable Economic Growth
India’s AI mission is determined to make the country a global artificial intelligence hub which is crucial to have a responsible AI infrastructure to boost the sector. India is the third-largest start-up ecosystem in the world, and has various start-ups which resort to cutting-edge AI tools and technology, making it necessary to keep a check on AI besides acknowledging its undeniable potential to bolster the country’s economic growth.
India stands at the edge of an AI revolution. It has started experiencing and is moving towards a transformative economy driven by AI. More importantly, this can be seen as a vision for attaining self-reliance and reducing foreign technological dependence, i.e., AI Sovereignty. The International Data Corporation (“IDC”), in its report, has focussed on the fact that AI and Gen AI adoption in India has been significantly increased, and is expected to reach an impressive figure of $6 billion by 2027. This clearly demonstrates the instrumental role of AI in job creation, i.e., meeting employment needs as well as promoting economic growth. Moreover, the Ministry of Electronics and Information Technology (“MeitY”) is poised to unveil a comprehensive policy framework for AI regulation with special emphasis on drawing up a deepfake regulation.
The existing regulations and the forthcoming, if any, must be formulated and designed to address the issues of economic sustainability and global competitiveness of technologies being developed. They must also be reviewed periodically in order to incorporate the steadfast changes that are primary to the nature of AI. These frameworks shall be framed to cater to the economic needs of the present economy as well as the upcoming AI boom, since, “This AI Moment is not a one-hit-wonder. Its implications for India are widespread and strike at the heart of culture and business model transformation with data as its most valuable asset”, says Linus Lai, Vice President of Digital Business at IDC Asia/Pacific.
Amidst India’s tussle with AI over the concerns of deepfakes and misinformation, the country’s think tanks are constantly evolving its AI regulations, which marks a dynamic approach in its artificial intelligence governance. MeitY Minister Ashwini Vaishnaw has said, “India’s AI strategy will mirror its data privacy laws – light touch regulation, more space for innovation.” Therefore, India has taken a middle stance in order to strike a balance between innovation and regulation. However, it is important to have economic considerations of AI while refining the future prospects for AI regulation.
4. The Economic Conundrum of AI: Regulations and Legislation for a Sustainable Digital Future
AI needs to be regulated according to its genius, the greater its power to harm society, the stricter the laws. This can be attained by a simple formula, i.e., AI Ethics, added to AI Governance, along with Responsible AI equals a law that meets the needs of humans and the AI hour. This is possible but challenging due to the complexity and nuances of law, which may not be fully captured by mathematical formalisms alone. For instance, with countries spending a major chunk of their annual budget on autonomizing military warfare, it is crucial to ensure the existence of an international watchdog over AI operations in the military, for an exemption to AI in defence could lead to major catastrophe, credit to the petty political leaders given a free reign. As the EU Artificial Intelligence Act (“EU AI Act”) aims at a human-centric approach, human centricity should include the decentralisation of power. AI legislations have a vector effect, it can either stifle or encourage innovation and protect or attack global competitiveness.
A 2023 India EY report claims that there is a strong possibility of GenAI adoption in India to pour in USD 359 BN to USD 438 BN by 2030 over and above its baseline estimates. This shall lead to an increase in the country’s GDP by approximately 7.2%. It is further estimated that over the coming decade, this could evolve into a Trillion US dollar GDP. This achievement is no short of increasing the Compound Annual Growth Rate (“CAGR”) by around 0.9% to 1.1%. The country’s economy shall jump by leaps and bounds.
The current regulations of India mark a significant stride in the digital realm of AI. When compared with other major economies such as the EU and the US, India is developing its own approach. Although the EU has come up with an AI Act, there is no specific AI legislation or overarching regulations in the US. The risk assessment processes, compliance cost and administrative procedures prescribed in the EU’s AI Act could be a potential challenge to small and medium-sized enterprises. However, the Act will take into consideration the economic viability while determining penalties for startups. Nevertheless, the Small and Medium-sized Enterprises (“SMEs”) and startups must be prepared for increased costs, as they will need to rigorously focus on adhering to the legislation. Thus, AI firms may face an extra cost.
In contrast, India has adopted a more flexible, ‘soft touch’ to accommodate the country’s economic growth as well as the digital competitiveness of AI. Technology experts have expressed that stringent regulations or legal frameworks will hinder the burgeoning AI-driven economic growth. This has been brought to attention by Dr. Amar Patnaik, former Member of Parliament who opined “Strict regulations risk stifling its growing economy led by AI industry, necessitating a nuanced approach”. Another nuance to be observed is that having parallel legislations and regulations for AI and technology gives rise to grey areas, gaps, loopholes and overlaps, defeating the purpose that they are meant for.
Having parallel legislations and regulations for AI and technology gives rise to grey areas, gaps, loopholes and overlaps, defeating the purpose that they are meant for. That is why an umbrella legislation shall be formulated to consolidate the tech laws. For instance, the proposed Digital India Act, which is in its initial stages, can be drafted widely enough to accommodate the rising complexities to tackle the foreseeable challenges posed by AI. In addition to this, the current regulations, advisories, and legislations shall be made subject to review at a definite interval by a competent authority to amend and incorporate new policies considering the dynamic nature of AI.
5. Conclusion: The Path Ahead
Artificial Intelligence is a dynamic arena with India’s AI journey having just started. AI is poised to revolutionise the different facets of life. To ensure harmony, it is essential to navigate through the Global AI Race. With India being amongst the favourites in this race with its human workforce, robust talent and infrastructure, it is set to become a prominent player in this contemporary digital landscape.
The Indian AI Ecosystem is experiencing a significant boost due to its vibrant combination of entrepreneurial drive, technological advancement and government policies. The instrumental potential of this new global supremacy with regard to economic growth and sustainability cannot be undermined. India’s emerging technologies including FinTech, healthcare, and education are well-positioned to capitalise AI advancement and streamline growth. Having poured economic resources into the country’s AI revolution, the future prospect of AI will largely depend on the economic harness that it unfolds.
As AI gets established and gains power to revolutionise this digital global village, so does its power to pose certain challenges ranging from ethical dilemmas to security threats. Having acknowledged the dynamic nature of AI, the Indian government has come up with advisories and regulations to create a supportive environment to develop a strong ecosystem. Further, it has become the need of the hour for the government to keep a check of the current regulations and advisories from time-to-time-basis and formulate consolidated legislation to balance innovation, growth and governmental responsibility. Hence, the government must ensure a fostering legal environment for AI advancement and economic growth, which serves humanity best while unlocking the transformative potential of AI.
This article is a part of the DNLU-SLJ (Online) series, for submissions click here.
Students, Rajiv Gandhi National University of Law, Punjab
