India Urged to Accelerate AI Development Amid US-China Rivalry, Economic Survey Highlights
“There is no time to waste,” warns the Economic Survey 2025–26, highlighting the urgent need for India to adapt to a rapidly evolving global landscape. As the world witnesses a growing rivalry between the United States and China, the survey emphasizes that technological prowess will increasingly dictate strategic influence. It calls for India to transition from being the “IT sector back office” to becoming an “AI front office.” The report stresses that mere resilience is insufficient; India must achieve “strategic indispensability” to secure its position in global value chains and avoid being easily replaced or coerced.
Technological Transformation and Global Dynamics
The Economic Survey draws attention to the shifting dynamics of global power, asserting that the 21st century will be defined by “compute” — a term encompassing computing power, graphics processing units (GPUs), and the essential minerals that support them. This transformation is expected to reshape global alliances and economic hierarchies. The survey notes that the United States is actively reconfiguring its alliances, favoring bilateral trade agreements, export controls, and technology regulations. The Pax Silica initiative, launched by Washington, aims to establish a framework for the AI ecosystem, encompassing energy, critical minerals, advanced manufacturing, and AI models. Additionally, the passage of the GENIUS Act, which focuses on dollar-backed stablecoins, poses potential disruptions to capital flows in emerging economies, further complicating India’s strategic landscape.
Adopting a Bottom-Up Approach for AI Development
The survey identifies a significant divide in the global AI landscape, with Western economies predominantly following a top-down model characterized by large-scale AI firms, substantial private investment, and concentrated intellectual property. In contrast, many other regions have embraced a bottom-up approach, emphasizing distributed innovation, strong state coordination, and application-specific AI. Given India’s unique constraints and capabilities, the survey advocates for a bottom-up strategy rather than attempting to replicate the capital-intensive models of the US and China. This approach is deemed strategically necessary for India to carve out its niche in the global AI arena.
India’s Advantages in the AI Landscape
Despite the challenges, the Economic Survey highlights several advantages that position India favorably in the AI sector. India ranks among the top global contributors to AI research and boasts a substantial pool of technical talent. The country is home to an AI-literate workforce, second only to the United States in 2024. Furthermore, India’s vast and diverse domestic data presents a significant comparative advantage. The survey points out that the “heterogeneity and scale” of India allow for the creation of rich datasets across various sectors, including health, agriculture, finance, and governance. However, these assets remain largely underutilized, indicating a critical area for development as India seeks to enhance its role in the global AI landscape.
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