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ChatGPT and DeepSeek AI applications being used on mobile phones in Sopore, Jammu and Kashmir, India, on February 5, 2025.
The Current Landscape
This year, market dynamics shifted when China’s startup DeepSeek launched a groundbreaking artificial intelligence model that is both cost-effective and efficient. As India garners attention for its rapid economic growth and a tech-savvy populace, questions arise about the nation’s potential to develop its own equivalents to major players like OpenAI or Anthropic at a more attractive price point.
In an engaging discussion with Kunal Bahl, a prominent entrepreneur and investor, insights were shared regarding the future of AI development in India. Bahl, the co-founder of Titan Capital and the founder of the renowned e-commerce platform Snapdeal, is also a judge on Shark Tank India. He remarked, “India’s trajectory in public digital infrastructure is paving the way for future AI projects, and we can expect an Indian equivalent of DeepSeek to emerge through collaborations between private and public sectors within the next four to five years.”
Bahl emphasized several initiatives that could facilitate the creation of large language models highly regarded on a global scale.
Chip Manufacturing Initiatives
One of the crucial aspects is India’s chip manufacturing endeavors, which are gaining momentum. India’s Commerce Secretary, Piyush Goyal, disclosed that the country expects to produce its first silicon chip in two years. Additionally, Reliance Industries is reportedly constructing a significant data center in Gujarat, with CEO Mukesh Ambani aiming for it to be the largest globally.
However, developing the necessary technology for advanced chip design and manufacturing poses substantial challenges. For illustration, Intel has faced numerous obstacles in producing AI chips within the United States. Despite these hurdles, India has seen an influx of investments from U.S. semiconductor firms. Notably, Micron and AMD are investing heavily in the country’s tech landscape. Nvidia’s CEO, Jensen Huang, visited India in 2024, revealing a partnership with Reliance Industries to foster AI research and development. He also assured access to the latest Nvidia Blackwell chip for Reliance.
Bahl noted, “These collaborations highlight India’s integral part in the global tech landscape and underscore the advantages of partnering with large domestic entities early on.” Increasing domestic chip production could mitigate the ramifications of U.S. export restrictions on chips.
Just before leaving office, former President Joe Biden enacted a diffusion rule potentially limiting access to high-performance graphic processing units for several countries, including India. This regulation is due to be implemented this spring. The incoming President, Donald Trump, possesses the authority to reverse the rule but has yet to imply a definitive stance.
Artificial Intelligence Developments
Bahl further asserted that large Indian conglomerates may spearhead innovation in AI by devising multimodal large language models tailored to specific industries. Major players such as Reliance Jio, Tata Electronics, Adani Group, TCS, and Infosys are becoming pivotal in India’s evolution into a hyperscaler.
With barriers to the Chinese market, U.S. companies are increasingly interested in fostering India’s AI ecosystem. OpenAI’s CEO Sam Altman visited India earlier this month, meeting with IT Minister Ashwini Vaishnaw to discuss collaboration opportunities for creating a comprehensive AI framework in the country encompassing GPUs, models, and applications. Notably, Altman indicated that India is OpenAI’s second-largest market by user base.
Government initiatives, such as the “India AI mission,” allocating approximately 103 billion rupees ($1.2 billion) to bolster the nation’s AI capabilities, are anticipated to play a supportive role in exponential growth. However, Bahl acknowledged that while funding for AI in India is on the rise, it still lags considerably behind investments made in the U.S. and China.
According to Venugopal Garre, Bernstein’s Head of India Research, the insufficient investment in homegrown tech could hinder India’s chances of thriving in the AI landscape. He remarked, “The focus on building deep tech capabilities has not been a priority, especially against a backdrop of readily available products from U.S. tech giants, now managed by Indian leaders.” He contrasted this with China, which has actively developed domestic competitors across various sectors, including AI.
Nonetheless, being an early mover in tech does not guarantee dominance in the market. Neil Shah, Co-Founder at Counterpoint Research, indicates that the current AI models are just beginning to take shape, illustrating a resemblance to the early days of search engine competition, where Google emerged later but quickly established market leadership.
Another significant topic of discussion revolves around the potential for AI to affect employment within India’s technology sector. With prevailing unemployment rates, the integration of productivity-enhancing AI tools could further strain the labor market. Akhil Gupta, former head of Blackstone India, warned that the nation’s economic environment must address its role within the AI ecosystem to avoid becoming vulnerable to it.
Gupta concluded, “While India has a long way to go in developing its own version of DeepSeek, discussions reveal that the country is beginning to recognize the urgent requirement for adaptation, inspired by China’s rapid advancement.”
The developments ahead remain closely observed.
Key Updates
India announces new electronics manufacturing plan. Recently, a significant initiative was approved by the Indian government, backed by ₹22,919 crore ($2.67 billion) to enhance self-reliance in the electronics manufacturing sector. More details can be found here.
The Reserve Bank of India accelerates liquidity actions. The central bank achieved a four-year high in its open market operations during the fiscal year 2025 by purchasing Government of India securities, underscoring the importance of managing financial system liquidity amid slower domestic growth and international uncertainties.
Tariff reductions commence under trade concessions with the U.S. Since January, India has started reducing tariffs on certain imports from the United States, including motorcycles and whiskey. Notably, the nation abolished the Equalisation Levy, which taxed digital services from foreign companies.
India’s luxury market is flourishing. Valued currently at $8 billion, India’s luxury retail market is projected to expand to $14 billion by 2032. Contributing factors include an increasing number of high-net-worth individuals and brands customizing their product lines for the Indian market.
Temasek formalizes partnership with Haldirams. The Singapore state investment fund is set to acquire a stake in Indian confectionery company Haldirams, with an agreement expected to expedite Haldiram’s international expansion.
Market Overview
On a recent Thursday, Indian stock markets reflected a downturn following President Donald Trump’s declaration of 26% tariffs on exports to the U.S. The benchmark Nifty 50 had dipped by 0.17%, while the broader BSE Sensex index decreased by 0.32% as of 11:55 a.m. local time.
For perspective, the Nifty 50 has fallen by 1.56% since the year began, with the BSE Sensex down 2.25% over the same period. Meanwhile, the benchmark 10-year Indian government bond yield saw a slight rise to 6.490%.
Vivian Thurston, a portfolio manager at William Blair, mentioned on CNBC that India maintains one of the highest trade surpluses with the U.S. However, these exports contribute merely 2%-3% of India’s GDP, suggesting that the overall impact of the tariffs on economic growth is expected to be minimal.
Looking Ahead
The Reserve Bank of India will conclude its Monetary Policy Meeting on Wednesday, when analysts anticipate potential interest rate cuts. Following this, the consumer price indices for the U.S. and China will be released, providing insights that could shape future fiscal policies in these countries.
Upcoming key dates include: April 4: U.S. nonfarm payroll figures for March, speech from Federal Reserve Chair Jerome Powell, and the final reading of India’s HSBC composite purchasing managers index for March.
April 9: India’s interest rate decision and Japan’s consumer confidence figures for March.
April 10: U.S. consumer price index for March, Federal Open Markets Committee minutes from March, as well as China’s consumer and producer price indexes and Japan’s producer price index for March.
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