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AI Development in India – the First Half of 2023

In this special series, we gathered a 6-month report (from January 2023 to early July 2023) detailing the transformative impact that the launch of ChatGPT has had in

While the US media often gets caught up in self-centered narratives, we firmly believe that expanding our horizons to encompass global AI affairs, cultural nuances, and political variations can benefit one a lot.

India, known for its booming startup ecosystem, is actively participating in the global race of AI development. However, there are concerns about whether India's contribution to the AI sphere has materialized significantly. Despite having over 1,500 AI-based startups with billions of dollars in funding, India is still considered to be falling behind in the global AI innovation race. Is it because of the “Shiny Object Syndrome”?


At a recent event in India, Rajan Anandan, a former Vice President of Google in India and South East Asia and current venture capitalist, inquired OpenAI’s CEO Sam Altman about India's potential to develop a tool like ChatGPT. Explaining the dynamics at play Altman suggested, it would be challenging for Indian companies to compete with OpenAI on training foundation models. While Sam Altman's perspective is respected due to his extensive work in AI, India's tech scene doesn't view his caution as a limiting factor. "He certainly doesn't have an understanding of India's capabilities in AI," said Minister of State for IT, Rajeev Chandrasekhar.

As for the capabilities: India garnered substantial investments in 2022, as per the Stanford AI Index report. Ranking fifth globally, India surpassed formidable competitors like South Korea, Germany, Canada, and Australia, and attracted a noteworthy total investment of $3.24 billion, as reported by the National Association of Software and Service Companies (NASSCOM). In addition to its impressive investment figures, India boasts the second-largest talent pool for AI and ML on a global scale.

Responding to Altman, C.P. Gurnani, CEO of a leading Indian IT company Tech Mahindra, wrote on Twitter, "OpenAI founder Sam Altman said it’s pretty hopeless for Indian companies to try and compete with them. Dear @sama, From one CEO to another.. CHALLENGE ACCEPTED." Later, Altman clarified that his words were taken out of context.

Amid this global race, India remains dominated by AI behemoths such as OpenAI’s ChatGPT, Google Ventures–backed Anthropic, or Google’s Bard. It is worth noting that ChatGPT supports Hindi and other Indian vernacular languages such as Assamese, Kannada, Tamil, Telugu, and others which surely gave a major boost to ChatGPT’s usage in the Indian market.

Despite the existence of more than 1500 AI-based startups in India, with over $4 billion in funding, analysts suggest that India is still falling behind in the global AI innovation race.

Existing Challenges – Shiny Object Syndrome

Notably, the Indian IT which is currently wooed by generative AI seems to have a major shiny object syndrome. Since last year, the industry was betting big on Mark Zuckerberg’s darling project: the metaverse. The virtual reality dream led to a paradigm shift in the industry.

Since Facebook rebranded itself as Meta in 2021, with a $10 billion commitment, Indian IT had been hyperventilating over the virtual platform. India was expected to touch $1.1 billion by 2023 at a CAGR of 57 percent, according to a white paper released in March 2023.

In a very short amount of time, they had to change their focus completely.

Tata Consultancy Services (TCS) announced 60 metaverse projects globally. On the contrary, during its FY23 earnings announcement, the lead service provider said that it has seen an increase in interest among clients in generative AI. The company's Chief Operating Officer Ganapathy Subramaniam said that TCS has already started integrating generative AI into its portfolio of services.

During the fiscal 2023 earnings call, Infosys’ Chief Executive also stated the company's commitment to generative AI platforms.

Even though Tech Mahindra seemed to concentrate on metaverse last year (launching a Metaverse Virtual Lounge, Open Banking Sandbox environment, and several digital platforms, including 'TechMVerse), this year it’s going all-in on AI with the launch of its generative AI studio earlier in June.

As per the Stanford AI Index Report, 2023, Indian companies received $3.24 Bn in funding in 2022, securing India the fifth spot among the countries that received the most investments in AI. As India's mature startup ecosystem largely remains on the sidelines of the generative AI race, emerging startups are rising to the challenge.

Firms such as Gan, which enables large-scale video repurposing for businesses, and TrueFoundry, aiding in the construction of ChatGPT with proprietary data, are part of this new wave of companies spearheading the charge in India's AI landscape.

Among the startups that raised funding in 2022, Chennai-based conversational AI startup Uniphore raised $400 million in a Series E Round taking its valuation to $2.5 billion. Among 2023’s biggest fundraises there is US-based AI startup (but with Indian roots) Mad Street Den, which raised $30 million in a Series C round led by Avatar Growth Capital.

Several Indian organizations, including Zoho, GupShup, and Exotel have unveiled systems for building models akin to ChatGPT powered by GPT models.

All is Quiet On The Regulation Front

Currently, regulating emerging technology does not appear to be the primary priority. Rajeev Chandrasekhar, in his statement to the Parliament on April 5, 2023, acknowledged the evolving nature of generative AI and the absence of specific regulations at present.

In India, the government possesses the authority to collect and utilize data from its citizens, much like a librarian's sole authority to gather, manage, and loan out books. Additionally, the government has the power to establish rules for private entities. These powers raise significant questions about the necessary safety measures and rights for private parties and individual citizens. Policymakers are beginning to recognize the possibilities and dangers of AI, treating it like a shiny new toy. However, to create sensible rules that align with the constitution, a deep understanding of this new 'toy' - AI technology - is absolutely essential.

With India heading into an election year, the absence of regulations is concerning, considering the potential misuse of AI for spreading targeted misinformation.

India is currently in the process of reviewing how to regulate AI through the upcoming Digital Indian Bill, which will replace the Information Technology Act.

AI Doomism

Yet, amidst the nation's AI-driven optimism, significant concerns persist. Last month, Zoho co-founder Sridhar Vembu co-signed an open letter, along with former NITI Aayog vice-chairman Rajiv Kumar and iSPIRIT Foundation co-founder Sharad Sharma, calling on policymakers, academics, and stakeholders to debate AI's impact on India.

Vembu highlighted the potentially seismic disruption AI could introduce, putting millions of jobs at risk overnight and creating "unprecedented disruption of the existing social order." Without appropriate safeguards, the rapid adoption of emerging technologies could pave the way for "chaotic and potentially catastrophic consequences for humanity."

As AI continues to proliferate, India, like many nations, must grapple with an essential question: Is the risk of unregulated AI expansion — a scenario that many experts deem concerning — one the nation can afford to take?

Written by Tasmia Ansari

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