Artificial Intelligence in India – Opportunities, Risks, and Future Potential

Over the last two years, we have witnessed a steady increase in our percent of readership in India. Sometime in 2017, Bangalore became one of our largest sources of job applicants, and our single biggest city in terms of readers – overtaking both London and NYC.

Given the Indian government’s recent focus on developing a plan for artificial intelligence, we decided to apply our strengths (deep analysis of AI applications and implications) to determine (a) the state of AI innovation in India, and (b) strategic insights to help India survive and thrive in a global market with the help of AI initiatives.

We traveled to Bangalore in an effort to speak with experts from the Government of India, Indian AI startups, AI academic researchers in India and data science executives at some of the largest companies operating in India, including Reliance ADA, Amazon, AIG, Equifax, Infosys, NVIDIA and many more.

Through the course of this research our objective was threefold:

• To understand the state of AI adoption in India
• To determine the opportunities and risks that artificial intelligence poses for Indian industry and society
• To provide the Indian government and tech community leaders with strategic recommendations for using AI to promote prosperity in India

We have broken our analysis down into the following sections below:

1. AI Adoption and Potential in India – an Overview
2. Strengths and Opportunities for India in Artificial Intelligence
3. Weaknesses and Risks for India in Artificial Intelligence
4. Strategic Recommendations for Success in the Indian Artificial Intelligence Ecosystem
   1. The Big Themes
   2. Strategic Recommendations – The High-Level View

We’ll begin by examining what we learned about AI adoption in India:

1 – AI Adoption and Potential in India – an Overview

The Initiatives of the Indian Government Thus Far

Since the early 90s, the IT and ITeS services sector in India has been of tremendous importance to its economy eventually growing to account for 7.7% of India’s GDP in 2016. In an attempt to capitalize on this foundation, the current Indian administration announced in February 2018 that the government think-tank, National Institution for Transforming India (NITI) Aayog (Hindi for Policy Commission), will spearhead a national programme on AI focusing on research.

This development comes on the heels of the launch of a Task Force on Artificial Intelligence for India’s Economic Transformation by the Commerce and Industry Department of the Government of India in 2017.

The industry experts we interviewed seemed to agree that artificial intelligence has certainly caught the attention of the Indian government and the tech community in recent years. According to Komal Sharma Talwar, Co-founder XLPAT Labs and member of India’s AI Task Force:

“I think the government has realized that we need to have a formal policy in place so that there’s a mission statement from them as to how AI should evolve in the country so it’s beneficial at large for the country.”

Indeed it’s comments like Komal’s that made us realize that we should aid in determining a strategic direction for artificial intelligence development in India – and learn as much as possible about the possible strategic value of the technology.

In our research and interviews, we saw consensus (from executives, non-profits, and researchers alike) that healthcare and agriculture would be among the most important sectors of focus in order to improve living conditions for India’s citizens.

Just as Google, Oracle, Microsoft, and Amazon are battling to serve the cloud computing and machine learning needs of the US government, the next three to five years may lead to a similar dynamic within India. As the Indian government pushes for digitization and enacts more AI initiatives, private firms will flock to win big contracts – adding to the pool of funds to develop new technologies and spin out new AI and data science-related startups.

Mayank Kapur, CTO of Indian AI startup Gramener, says that the government is still the largest potential customer for data science services in the country. Other experts we spoke with have enunciated that more and more Indian startups and established tech firms are beginning to implement AI in their products and services.

Mr. Avik Sarkar, the Head of the Data Analytics Cell for NITI Aayog explains that the think-tank – which has been tasked with spearheading India’s AI strategy – is currently engaged in the following public sector initiatives:

“The current areas of focus for AI applications in India are majorly focused in 3 areas:

• Precision Agriculture – The government has initiated a proof of concept pilot in 15 districts (counties) in India to use artificial intelligence based real-time advisory based on satellite imagery, weather data, etc. to increase farm yields where the farm production levels are low

• Healthcare – Pathologists and Radiologists are very few in number India relative to the overall population, (especially in rural areas) and these are applications which can be augmented through image recognition AI. We are working on augmenting the productivity of existing pathologists and radiologists as the first (of many planned) pilot project in healthcare. NITI Aayog is working on early diagnosis and detection of Diabetic Retinopathy and Cardiac Risk based on the AI models. Such initiatives would in the long run help patients on proactive medication in early stages rather than reactive healthcare in advanced stages – bringing down healthcare costs and better chances of recovery. 

• Indian Languages Project – We have initiated a long-term project to build a complete natural language processing platform for Indian languages. This would aid in the development of several applications, like conversational general and career counseling through chatbots and assistants, conversing in 22 Indian languages.”

How is AI Interest in India Manifesting Itself Today?

With the government’s growing interest around AI applications in India, Deepak Garg the Director at NVIDIA-Bennett Center of Research in Artificial Intelligence (and Director LeadingIndia.ai) believes that there has been a significant growth in interest levels around AI across all industry sectors in India.

He explains that although AI attention is considerably smaller in India than in China or the USA, the increased AI interest has manifested itself in the following three ways:

“1) Industries have started working to skill their manpower to enable themselves to compete with other global players

2) Educational institutions have started working on their curricula to include courses on machine learning and other relevant areas

3) Individuals and professionals have started acquiring these skills and are comfortable investing in upgrading their own skills.”

The Current Challenges to AI Traction in India

Despite the initial enthusiasm for AI, there were also a few opinions from experts about a sense of unfulfilled potential and that the country could be doing far more to adopt and integrate AI technologies.

Another common theme we heard often during our interviews was that – culturally speaking – the cost of failure is much higher in India than the West. While failing in an attempt at bold innovation and grand goals might be seen as noble or brave in Silicon Valley or New York City (or even Boston), failure often implies a loss of face in India and some Asian countries. This has historically meant a lack of room for innovative experimentation.

Dr. Nishant Chandra, the Data Science Leader of Science group at AIG adds a valuable insight about the high stakes for failure in India and that cultural and economic factors play into raising these stakes:

“Indian society is not as forgiving to failure in entrepreneurship as US or Europe. So far, this has led to ideas borrowed from other places and implemented after customization. Yet I believe, entrepreneurs will build upon the success of IT services industry and establish globally competitive AI companies in near future.”

We caught up with Professor Manish Gupta at IIIT Bangalore – Manish is also a startup founder (VideoKen) and former AI researcher at Xerox and Goldman Sachs India. He expressed his disappointment in India’s lack of global AI participation:

“I think that we are not doing enough justice to our potential [in India]; I think we are really far behind some of the other leaders. I see a lot of American and Chinese companies at global AI conference like NIPS / AAAI and these two countries seem to be far ahead of the rest of the pack. I look at India as a country that ought to be doing a lot more.”

A number of our interviewees mentioned the prevalence of copy-catting business models in India (taking a famous or successful business model in the USA or Europe and reconstructing it in India), as opposed to the invention of entirely new business models.

Google is not the copy-cat of another business in another country, nor is Facebook, Amazon, or Microsoft – and many of the same interviewees we spoke with are hopeful that India will have its own global trend-setters as it’s technology ecosystem develops.

Next Steps for AI Development in India

Our previous research on AI enterprise adoption seems to indicate that it may be another 2-5 years until AI adoption becomes mainstream in the Fortune 500 – and even that is only at the level of pilots and initiatives, not of revolutionary results.

This “learning” phase – evident given the state of AI adoption the Western markets – may last longer in India’s relatively underdeveloped economy.

Aakrit Vaish, CEO of Haptik, Inc. also seems to suggest that in the next 10 years we can expect that understanding of AI and how it works will potentially be more commonplace among most technical industry executives:

“India may go in the direction that China has gone, become their own economies. There are probably going to be pockets, Bangalore might be good at deep tech like robotics or research / Hyderabad being good at data/ AI training, Mumbai being good at BFSI and  Delhi for agriculture and government. Like China, most solutions will probably be applied to the local economy.”

India’s services sector (call centers, BPOs, etc – roughly 18% of the Indian GDP) have a significant potential opportunity to cater to the coming demand for data cleaning and human-augmented AI training (data labeling, search engine training, content moderation, etc).

Komal Talwar from Government of India’s AI Task Force added her views on what the Indian government’s future strategy around AI might be focused on:

“We think AI could have a great impact in health sector. There is a scarcity for good doctors and nurses, with AI the machine can do the first round of diagnostics. Staff can carry machines with them to help cut down in the physical presence needed for doctors.

The government is really encouraging startups to have AI applications that really have a social impact (AI in health, AI in education, etc), where startups compete to solve social problems.”

Key Points:

Has India “woken up” to artificial intelligence? Expert opinions on this topic seem mixed, yet through our analysis, we managed to distill the following themes:

• Most experts agreed that there is some indication of grassroots level AI adoption today in India, yet the pace of innovation around establishing a comprehensive AI strategy for the future isn’t comparable to America or China today.
• Most of the traction today in India seems to be in the form of AI pilot projects from the government in agriculture and healthcare and the emergence of AI startups in Indian software hubs like Bangalore and Hyderabad.
• Some of the experts we interviewed believe that India’s underdeveloped economy will considerably slow broad AI adoption.
• The Indian government and Indian tech hubs are certainly aware of (and often excited about) AI, but adoption lags interest.
• India could become the hub for data cleaning around the world. The IT services industry could easily transition into human-trainers of AI, a need that already exists (as evidenced by Figure Eight, Clickworker, Gengo.ai, and other players in the human-assisted AI training market).
• In India, the government push is towards AI applications that have social benefits like health care, education and agriculture. The direct financial impact of these sectors is massive, but the government seems to be focused first on improving the health and well-being of its citizens.

Interested readers can learn more about AI applications in India today from our other articles about AI traction in some of India’s largest sectors:

• Artificial Intelligence in Indian Agriculture – An Industry and Startup Overview
• Artificial Intelligence at India’s Top eCommerce Firms – Use Cases from Flipkart, Myntra, and Amazon India
• Artificial Intelligence Initiatives at India’s Top IT Services Firms
• AI Applications in the Top 4 Indian Banks

2 – Artificial Intelligence in India – Strengths and Opportunities

The majority of our Indian AI respondents and interviewees showed optimism about India’s potential to be one of the key global players in the future of AI. Optimism about the prospects of one’s own nation’s success seems a natural bias (and one that we’ve seen before in our geography-specific coverage in Montreal, Boston, and more) – but India’s optimism isn’t unwarranted.

Since the early 90’s when the Indian economy opened up to foreign investment, the country has been considered by some economists as the “dark horse” among the larger economies in the world.

An Existing Foundation For Taking Advantage of AI

Historically, the slower adoption of IT services by domestic Indian companies (in some cases by even by a period of around 10 years) as compared to global competitors was an indicator of the unfulfilled potential according to some experts we spoke to.

Yet, most of the interviewees seemed bullish on the fact that this time around in the wave of AI, India is firmly backing its strengths as represented in the quote below from Aakrit Vaish Co-founder and CEO of Haptik, Inc.

“The Indian foundation of IT services and business process outsourcing makes me believe that such AI training jobs will be even more lucrative for India than elsewhere in the future.”

During the interview with him, Aakrit explained his stance with an example about the possibility that Indian BPO services providers could potentially be attractive in terms of skills and cost for tasks (which he believes will for a long time remain a manual effort) like cleaning and tagging of data in the near future.

We heard opinions from other experts favoring the view that India may be positioned well to take advantage of the AI disruption. Sundara Ramalingam Nagalingam, Head of Deep Learning Practice at NVIDIA India, shares his thoughts on some of the advantages India may have over other countries in terms of AI:

“India is the third largest startup ecosystem in the world, with three to four startups being born here daily. We believe India has a major advantage over other countries in terms of talent, a vibrant startup ecosystem, strong IT services and an offshoring industry to harness the power of AI.”

Kiran Rama, the Director of Data Sciences at the VMware Center of Excellence (CoE) in Bangalore also seems to agree that the cost-competitive talent in India will be an opportunity for companies looking to open offices in India:

“There seems to be a lot of opportunity for companies that are setting u shop in India. Especially since there is a supply of data science talent at a good cost advantage. I also think there Indians are starting to contribute to the advancement of machine learning libraries and algorithms.”

Strong IT Services and Existing IT Ecosystem

Subramanian Mani, who heads the analytics wing at BigBasket.com, an online Indian grocery e-commerce firm, reiterates the idea that the IT services background in India is an advantage.

He believes that the major difference between the software and AI waves is that although India was slow to adopt software service as compared to America, this time around with the AI wave, adoption will be much faster and only slightly behind the leading countries.

“This is the second wave. The software wave was 30 years ago. Folks in India realized that they’ve been able to scale software and I think AI / ML is an extension of software development.”

While software was often taught through books and in classrooms exclusively, many of the latest artificial intelligence approaches are available to learn online – along with huge suites of open-source tools (from scikit-learn to TensorFlow and beyond).

Going in, we knew that one of the key advantages for India would, in fact, be the very IT and ITeS sectors which will make it easy for Indian tech providers to transition into AI services, given that well-developed ecosystems have evolved over the past 25 years in cities like Bangalore and Hyderabad.

Manish Gupta, Director of Machine Learning & Data Science at American Express India, expressed optimism in Bangalore as an innovation hub:

“Bangalore has always been seen as the Silicon Valley of India and today there are lots of analytics companies here. It has all the ingredients to be a leader in the AI space. The state government is interested in planning and grooming for startups in this space as witnessed by the launch of the Center for Excellence (CoE) in AI setup by the GOI and NASSCOM in Bangalore.”

Diversity (at Scale) May be a Massive Opportunity

While the advantage from the existing Indian IT sector may have been more intuitive, Madhusudan Shekar, Principal Technology Evangelist at Amazon AWS explains through an example how India’s diversity and scale (generally considered a challenge) can be an opportunity to make the best out of a tough situation:

“In India, people speak over 40+ formal languages in about 800+ dialects. There are 22 national languages and if you want to build a neural network for speech, India is the best place to build that neural net. If you can build for India, you can most likely build it for other parts of the world.”

In this respect, India – with all of its language challenges – could be a petri dish for translation-oriented AI applications. The market for this technology – especially when backed by the Indian government – may well rival the kind of AI innovations developed around translation in other parts of the world.

Hundreds of Millions of People Coming Online

Another insight that was oft repeated by the experts was around the potential to have access to vast amounts of data in India. To further explain,  According to a report by the Telecom Regulatory Authority of India (TRAI) the total number of internet subscribers in the country as a percentage of the overall population increased by 12.01% from December 2013 to reach 267.39 million in December 2014.

Along these lines, Mayank Kapur Co-founder of Gramener cites the increased level of data collection and the scale to which it could potentially grow as an opportunity for India in public sector AI applications:

“In the public sector, we have an advantage of scale the amount of data that can potentially be gathered is huge. For example, leveraging data to provide access to services is a huge differentiator in the healthcare sector for applications like disease prevention or nutrition.”

Figure. Number of internet subscribers

in India in 2014 by access type (Source)

Juergen Hase the CEO of Unlimit- A Reliance Group Company, one of India’s largest private sector companies, expressed his thoughts during our research:

“The direct switch to mobile platforms in India means that there are no legacy systems to deal with and new technologies can be developed from scratch.”

As shown in the figure to the right, an overwhelming majority of India’s Internet subscribers gain access through mobile wireless networks.

As Juergen points out, what this means is that large-scale AI projects in India can be somewhat insulated from issues cropping up from legacy systems. This might also lead to a greater immediate mobile-fluency for India’s startup and developer communities, who need to appeal to an almost exclusively mobile market.

Juergen adds, in the future, we can expect that AI software will also potentially have this advantage in India as compared to developed countries where the ratio is more evenly distributed among mobile and fixed wireless users.

Take-Aways

We think our business audience will indeed find the next quote from Avi Patchava, Vice President, Data Sciences, ML & AI – InMobi, highly insightful in terms of gaining an overview of India’s biggest strengths with respect to the country’s ability to leverage AI. Avi neatly summed up what he believes are India’s four biggest strengths to face the upcoming AI disruption:

• “India has an abundance of engineering talent which has been trained over the last 2 decades which needs to be funneled into a new direction due to the automation of IT services. This core base of engineering is required to do things with AI at scale”

• “India has a culture that produces a large number of mathematicians, coders, and statisticians (independent of the engineers) Bangalore and to some extent Hyderabad already have decent ecosystem set up. London essentially tried to build its tech ecosystem in the past 5 years Bangalore has been at it for the last 25 years.”

• “Data – We’ve got a country that is rapidly moving towards digitization – For example, the Aadhar or UIDAI Project in India is the largest ever unique identifier project in the world. India is actively pushing more and more into creating public datasets and the fact that it is a democracy helps with this fact over China where public data may be restricted to the government”

• You’ve got over 3 million people who are either directly engaged in the IT services world in India and its around 14% of the Indian GDP. It was skilled work, but it was routine, which makes it a key opportunity for machine learning and automation. The IT services players like Infosys, Wipro etc have noticed this and started internal reorganizations to adopt AI”

The following points became evident through our interviews about India’s AI strengths and opportunities:

• India’s current focus on mobile platform first approach has meant that the most Indians’ first access to the internet is likely to be a mobile device. There were over 1 billion mobile telephone subscribers in India in 2016. What this means for AI in the country is that in many cases of B2C and B2B applications there are no standardization or compatibility issues cropping from legacy systems (like PCs or Macs) for new technologies which are being developed from scratch.
• The scale and diversity inherent in India can be an opportunity in terms of access to vast amounts of data which is an underlying necessity for any large scale AI project.

• Every year, India’s many universities produce a huge number of engineers and mathematicians; these are skills which play a key role in developing any AI system. The internet promises to limit the lag from first-world computer science classrooms to Indian companies and researchers, allowing a nation with a swelling young population to potentially keep pace (at least in some sectors or cities) with the genuine cutting-edge of AI.
• There seems to be a government push towards digitalization indicated by the launch of AI-oriented government initiatives like the AI Task Force and NITI Aayog – and these efforts are likely to spurn more artificial intelligence enthusiasm, companies, and research investment.
  

3 – Artificial Intelligence in India – Weaknesses and Risks

While there were many favorable views on the future outlook of the Indian AI ecosystem, there seemed to be different views among experts regarding the challenges that the country might have to overcome to survive and thrive in the AI disruption.

AI Hype vs AI Reality – and Often Stark Difference

We heard a significant number of experts allude to the fact that the hype around AI may still be very real in India and there exists here a common tendency to view AI as a discrete industry rather than the broad, core technology that it is (like the internet).

In addition to being misunderstood and not being properly leveraged, many of the experts we spoke with were candid about addressing what they see as relative weaknesses of the Indian AI ecosystem.

Aakrit Vaish from Haptik, Inc. shares his thoughts on the AI hype that he sees in the Indian tech scene today:

“Today AI is getting a lot of attention in India but nobody knows what it is or what are the best applications for it. There’s a little of a spray-and-pray attitude across the board.”

While AI hype is hard to escape in the tech press in any country – our speaking engagements in India seemed to affirm the state ambiguity around AI. We received post-presentation questions from attendees (about AI taking jobs, about the definition of AI itself, about the ongoings of Google and Facebook) that seemed like less informed questions than we might hear from a similarly technical audience in Boston or San Francisco.

This may mostly be due to the fact that AI applications are less well understood, and genuinely knowledgeable AI talent is rarer. We might suspect that over the coming few years – particularly in a tech hub like Bangalore – we’d see this knowledge lessen over time.

Venture Capital in AI still in Early Stages

Co-founder of XLPAT Labs and member of India’s AI Task Force Komal Sharma specifically points out that even some of the government projects have faced issues in terms of receiving funding for initiating AI pilot projects. She seems to indicate that the current Indian AI and startup funding ecosystem is not mature enough to be comparable to the US or even China.

“The problem that we have faced I think is funding in areas where our field is very niche. In India, IP is developing lots of interest, but we’re nowhere near the US or other countries.”

Komal was far from being alone in her lamenting AI’s lack of VC funding, and the sentiment of our respondents seems to be backed up by the data.

The World Economic Forum chart below features information from Ernst & Young:

Taken as a percent of GDP, Israel’s VC investments represent about 0.006% of GDP, while India’s investments represent around 0.002%. As the Indian economy continues to develop – and if India’s entrepreneurship trend continues – we should expect to see investment increase.

Lack of Collaboration Between Industry and Academia

Madhu Gopinathan Vice President, Data Science at MakeMyTrip, India’s largest online travel company, touches on a point repeated by other experts as well. He thinks that the two underlying factors here are larger salaries lie in the corporate sector, which is potentially creating a dearth of mentors for the next generation of software developers looking to transition into AI and the availability of data.

“Academia and Industry collaboration is a serious issue in India. Although we have a lot of universities, the incentives are skewed towards the corporate sector. For example, people like me who have an understanding of the technology may not be inclined to teach the next generation at universities, since working at the larger companies is far more lucrative today. “

Madhu believes that much of the “AI upskilling” of India’s development talent will occur on the job in the cutting-edge work environments of venture-backed companies, as opposed to in the classroom.

As Nishant Chandra from AIG puts it, the boom in the Indian IT services sector in the early 90s was partially born out of necessity – India just did not have a good “products ecosystem”. India has historically not done well with products and according to the experts, there also seems to be a dearth of good talent specifically for design and user-interface functions.

Sumit Borar, Sr. Director – Data Sciences at Myntra, the Indian fashion eCommerce firm, is of the opinion that the scale of AI talent in India is still very nascent although he expects this to change in the next three years:

“Talent will be the biggest strength for India with respect to AI. But AI is still new, so current talent in the market is very limited but in 3 years time I think that will become a strength.

Industry-university partnerships where students can work with real world data science applications and reskilling of existing workforces (example: getting software engineers to look at statistics or vice versa) are just beginning to take shape in India (starting with the unicorns).”

Cultural Factors

The cultural factors in India play a role in talent development here as explained by Nimilita Chatterjee SVP, Data and Analytics at Equifax:

“I see issues in AI talent in India are at 3 levels:

• Data science courses in India are tailored to technique and not to business context and application.

• Due to the high demand for data scientists with an experience level of 0 to 2 or 0 to 3 years, they are being recruited by other companies quite soon after you hire them; therefore, there is a risk of losing talented employees. At Equifax, we know that in order to attract and retain talent, we have to invest in a culture that people want to be a part of. We are providing employees with skill set training, offering collaborative projects, and investing in creating the next generation of leaders.

• The third problem is that it is sometimes tough to transition analysts to leaders. Many of our analysts are great individual contributors and although young talent in India are encouraged to be studious, there is not a very capable system in place for ensuring technically strong people transition well into ‘inspiring leaders.’ We are seeking to change this at Equifax. We’re offering rotational development programs that train our employees, offering them access to different parts of the business, as well as networking opportunities.”

The issues that Nimilita addresses above aren’t all that different from what we see in the United States (indeed in Silicon Valley) on a daily basis. It does seem safe to say, however, that experienced data science talent (more specifically: Talent who have applied data science and AI skills in a real business context) is much more sparse in India than it is in the USA – at least for now.

Access to Large Amounts of Data in the Finance Sector Is Still an Issue

Nilmilita also believes that another weakness for India today in terms of data access for AI applications in the finance sector stems from the fact that the Indian economy still operates primarily on cash. As of 2017, India’s Economic Times claims that cash comprises 95% of the Indian economy.

Although there is a small percentage of the population that is making the switch to digital transactions, she believes that this segment of the population is still not significant enough before AI adoption in this sector becomes widespread in India.

“India moving away from cash and being comfortable on a mobile phone, however that part of the population is still small. It will come into play in the future, but today it is still an issue in the finance sector.”

Professor Manish Gupta, CEO of VideoKen is of the opinion that the Indian tech community and government efforts around AI have not been “thinking big” in terms of how India can effectively leverage AI. Professor Gupta also mentions the lack of collaboration between academia and industry:

“One of the things we lack is courage… I think we lack the courage to set ambitious enough goals and to go solve those problems.

Just being cheaper than a Western idea is not true innovation… that’s not ALL that we should be thinking about.”

Take-Aways

The following points became evident through our interviews about India’s AI risks and weaknesses:

• Although there are VCs in AI starting to emerge, access to venture funding is rare.
• Lack of collaboration between the industry and academia specifically in the AI domain.
• Lack of ambitious or creative goal setting from the tech community.
• Language and translation issues are rife in India, making collaboration from state to state very challenging – slowing down information transfer and posing difficulty expanding businesses.
• A general lack of AI fluency – even in the tech community – compared to tech hubs in Europe or the United States.

4 – Strategic Recommendations for Success in the Indian Artificial Intelligence Ecosystem

In light of NITI Aayog’s recent report, and in light of our research on AI in India (and our understanding of AI’s economic possibilities in various tech ecosystems), we were determined to contribute to the national conversation about AI in India.

The purpose of this final section of our AI in India analysis is to provide the Indian government and Indian tech community with a set of actionable ideas for making the most of AI in terms of economic and social benefit.

We’ve broken this conclusion down into two sections:

1. Maximizing the Economic Impact of AI. We highlight the area that we believe is of the greatest import for India’s economic prosperity (IT services) – including an analysis of possible future of paths and action steps. This section was written by Daniel Faggella, Founder of Emerj.
2. AI in India SWOT Analysis Highlights. We provide an overview of what we believe to be the most important 1 or 2 strengths, weaknesses, opportunities, and risks of AI in India. This section was written by Raghav Bharadwaj of Emerj.

This final section – as with the rest of this research – is grounded in our conversations with dozens of AI experts in India, in addition to our analysis of other research efforts and precedents of AI’s impact in other tech ecosystems. We hope that the advice that follows will be of value for the tech and government leaders who will carry India into an age of AI disruption.

Maximizing the Economic Impact of AI: “Skills and IT Services at the Speed of Now”

India picked up on the software wave and the internet wave well behind the USA and Europe.

With the AI wave, there is the potential to catch up immediately thanks to substantial and continuing growth in internet connectivity, and India’s swollen population of young engineers could hypothetically leap directly to the cutting edge of programming, development, and data science.

India has a bulging population of young people and a clear academic focus on information technologies. If India can marshall this next generation of the tech-savvy workforce people into the right skills, they can form a huge base of just the kind of engineers and data scientists experts that the world will need most in the years ahead.

Hopefully, with access to all the latest algorithms, approaches, and use-cases thanks to the internet, Indian companies and schools can upgrade their skills nearly as quickly as do their peers in Boston or San Francisco.

We suspect that the business process outsourcing (BPO) and IT services sectors has

• It is an industry in which India plays a strong global role, giving Indian firms a base of knowledge and skills to allow them to potentially leap over
• It is capable of absorbing India’s young technology graduates, allowing India to retain its best tech talent
• The IT services sector could serve as an additional education period, keeping talent strong in the most modern and important technology skills (including data science, data infrastructure, machine learning)

Artificial intelligence isn’t destined for a necessarily positive impact on the Indian BPO and IT services sector. Automation and new technology solutions could erode India’s dominance in this back-office IT domain. With IT services being such an important center of growth for the Indian economy – it behooves India to make sure that AI technologies make their economic engine stronger, not weaker.

With the advent of artificial intelligence, there seem to be three main transitions that could happen to the BPO and IT services sectors in India:

1. They could be eaten away by companies that automate their work (basic IT services, customer service work, human resources work, payroll, etc…).

There’s almost certainly nothing good about this situation, unless India itself creates these new companies, and is able to retrain many of its talent to work in these new firms (which would involve significant upskilling).

2. They could stay at the bottom of the value chain, basically being relegated to tagging images, combing through data for edge cases, training algorithms, etc (we might name this scenario “The nation of mechanical turks”).

India already fills the role of the world’s outsourcing destination, and many of the firms in the crowdsourced data cleaning and tagging space (Figure Eight, Mighty.ai, etc…) have large teams in India, and for good reason: Costs are low. It seems unlikely that this work will bring much additional economic value to India. Staying at the bottom of the value chain is economically limiting, and completely unlikely to position India as a technology leader.

3. They could take their deep expertise in different business processes, and be the first to automate or augment them with artificial intelligence. This would involve taking their existing expertise in BPO and IT services and finding new and better ways to solve those business problems with AI and ML

This could pull out of a “copycatting” mentality (i.e. being a cheaper version of some Western business model), and become the kind of firms that the rest of the world references as “leading” and “premier,” not merely “less expensive.”

The services sector is where much of India’s current and future growth is likely to come from (https://www.ibef.org/industry/services.aspx), with IT services and business process outsourcing (BPO) services employing millions of Indians.

We believe this area is worthy of focus because:

• IT services firms are the low-hanging fruit of practical tech experience for India’s millions and millions of technology graduates who want to stay within the country after leaving school.
• If these firms move their services up the value chain, they are more likely to keep India’s top graduates inside the country (paying higher wages, doing more interesting and valuable work), as opposed to losing them as many of India’s most promising graduates leave for the USA, Europe, or elsewhere.
• Keeping young talent in the country – and giving them more engaging and cutting-edge problems – seems to be a natural step in the direction of new innovation, as opposed to technology and service “copy-catting” (simply taking a business model created elsewhere and trying to do it cheaper in India).
• Having young talent working on more high-level problems in the IT services space seems likely to spin out startups, as young people engage with hard problems together.
• Only with more promising talent and projects will VC investments continue to grow (the base of young companies needs to be there for investment to increase).

India should think about its competitive advantage the same way that Silicon Valley VCs think about the AI advantage of their portfolio companies. Namely, India should assess its areas of expertise areas and the areas where it collects masses of proprietary data. So what is the “proprietary data plume” (a term we heard first in our interview with Silicon Valley investor Ben Narasin), or self-feeding data ecosystem that India can “own” and continue to build more and more value around?

Focusing on BPO and IT services sector, it seems safe to say that India has tremendous expertise in:

• Customer service operations (chatbots, routing, directing customers to support resources, etc)
• Call center operations (automating voice and conversation, routing calls, providing analytics and feedback on call performance, etc)
• Data entry, data management, and quality assurance workflows
• HR and payment processing workflows

Leading in the field of white-collar and business process automation would indeed force India to compete on technical developments, rather than price. Automating office and IT work is an opportunity for all businesses and markets. For this reason, should India decide to lead the world in automating and augmenting its BPO and IT services businesses, it will be competing with startups and with large consulting firms (such as McKinsey, Accenture, Deloitte) on many fronts.

The key for Indian BPO, IT, and tech firms will be to pick the domains of focus where their expertise is strongest (relative to the rest of the world), and where economic opportunity is the largest.

AI in India SWOT Analysis Highlights

Strengths:

• India has historically produced a large number of engineers, mathematicians and software developers every year. In addition to this, nearly two-thirds of Indians are under the age of 35 and almost half are under 25. By 2020, India will be the youngest country in the world, with a median age of 29 years, compared with a median age of 37 years in China at that point.
  • India will need to put to work its growing number of young engineers and scientists in the coming decade. Enacting any AI policy at the scale of a country like India will require this foundation of this young talented workforce.
• Existing IT ecosystem in India will enable a relatively easier transition into AI services.
  • Over the last 25 years, the IT and ITeS sectors have accounted for a major chunk of the country’s GDP (see figure below). Cities like Bangalore and Hyderabad are developing hubs for IT service exports today. India is also the third largest startup ecosystem in the world today with Bangalore again being at the top of that list. The industry is now somewhat mature and added to the cheaper labor costs, a strong foundation for the upskilling using AI is already in place and economically makes sense.

Source: NASSCOM

• Timely government funding initiatives to create good building blocks for an AI ecosystem. (Historically the Indian Government has been slow to react to technology waves – The domestic Indian IT sector was a decade slower to fully arrive in comparison to the US or China)
  • In terms of providing financial support for AI programmes, the Ministry of Electronics and Information Technology, Government of India, has been funding projects by educational institutions in the areas of ubiquitous computing and wireless sensor networks for real-time landslide monitoring and perception engineering (e.g. artificial sensing, perceptual robotics). The ministry has also been operating a Technology Incubation and Development of Entrepreneurs (TIDE) scheme for facilitating technology innovation over the last decade.
  • Although this is a start in the right direction, the level of funding from the government so far is much smaller in India compared to US and China. The recommendation here would be to develop more such public sector initiative where private sector firms can gain large contracts, strengthening the government-industrial complex in AI

Weaknesses:

• Industry and academic collaboration has been historically very underdeveloped. According to this report by Fujitsu in 2005, on university-industry collaborations in Asian countries, such collaborations in India were only significant (comparable) in number after 2003.
  • Building a network of alliances between the services and products industries, academia, government organizations and start-ups. For example like the Danish ROBOCLUSTER initiative in Denmark focused on Robotics. Centers of Excellence are a good start in this regard.

Opportunities:

• Leveraging BPO and back-office expertise, India’s IT services firms could potentially develop the world’s best office automation and BPO AI applications. This would allow India to develop a higher margin product industry, in addition to their wide low-cost services sector.
• Data cleaning and data tagging is a huge opportunity for near-term business. The BPO industry in India may find an opportunity in data cleaning and tagging in massive datasets, which will eventually be used to train and error-correct AI. Cheap skilled IT labor can potentially enable this opportunity. (Note: We believe that reliance on this method of AI-related work could be a detriment in the long term, which we cover in the “risks” below.)
• Upgrading the IT education to be on par with USA and China. There should be no “gap” between India and other nations in IT learning, and the internet could help to ensure that India’s youth bulge could receive exposure to the most modern AI approaches. Having access to a young and skilled data science workforce with graduates right at the cutting edge of the technology could be a massive boost for innovation.

Risks:

• AI may automate low-end services work, call center work, and BPO work:
  • The fear that AI is stealing jobs is not unique to India, but it could hit this country particularly hard because a big of its economy comes from IT services which involve relatively routine work that is prime for computers to take over.
  • Looking ahead five years in the future, in some cases, Indian IT services companies will automate the work themselves (requiring upskilling of the workforce). In other cases, companies in the West will do it, so they no longer have to outsource work out to humans in India (resulting in loss of business).
  • We believe that if the Indian tech services sector doesn’t embrace AI, or if they only embrace low-end data entry and data labeling work, automation and encroachment from foreign tech firms could be a significant financial blow to the country.

While the NITI Aayog released the National Strategy for AI which addresses what would be India’s strategy in AI, the Ministry of IT and the Ministry of Commerce and Industry have also made similar efforts in the past.

According to Mr. P. Anandan, CEO of Wadhwani AI, nonprofit independent research institute with mission of AI for social good (and previously the Founder and Managing Director of Microsoft Research India, Professor of AI at Yale University and a member of Board of Governors of IIT Madras), the most prominent area of convergence among all these efforts has been around answering the question – What could be India’s leadership position in AI?

Anandan goes on to add:

“Germany, Japan, France etc. all have AI strategies tailored for their own countries needs and opportunities. India can be a country that leads ‘AI for all’ simply because that is necessary problem for us to solve and if we do, it will be useful for the rest of the world as well. India’s real opportunity is doing AI for social good as we have historically always been a technology test bed for social efforts and we possess the technological know-how to get it done reasonably well here.”

We certainly hope that India can make the most of artificial intelligence – both for the wellbeing of its citizens and to ensure the health of its economy. The next five years will be a time to set both the pace and trend of AI adoption in the country.

 

Header image credit: trendingus