India’s AI paradox: high talent, low investment, lukewarm sentiment

India is fast becoming an AI talent powerhouse. It ranks second only to the United States in AI skill penetration as per the AI Index Report 2025 by Stanford HAI.

Between 2016 and 2024, India saw a staggering 252% increase in its AI talent pool—one of the highest in the world. Yet, for a country with such deep human capital in artificial intelligence, its actual investment in the sector remains surprisingly modest.

Since 2013, India has attracted just $11.29 billion in private AI investments. In comparison, the United States leads the global tally with $470.9 billion, followed by China at $119.3 billion and the United Kingdom at $28.2 billion. Even smaller countries like Israel ($15 billion) have pulled in more capital over the past decade.

This disconnect between capability and capital raises an important question: Is India underplaying its AI hand?

Talent without takers?

The numbers in the report suggest India is brimming with potential. In fact, alongside the US (2.6), India (2.5) leads globally in AI skill penetration. It’s also one of the rare countries where the concentration of AI talent between men and women is nearly equal—an anomaly in a world where men overwhelmingly dominate AI roles. For instance, in 2024, Israel reported the highest concentration of female AI talent at just 1.6%, yet India and Saudi Arabia stood out for breaking the gender skew.

Moreover, Indian students are fuelling global AI ambitions. In 2023, they, along with Chinese students, accounted for 93% of the 95,130 international master's students in computing-related fields in the United States. Among international PhD students, they made up 60%. Between 2022 and 2023 alone, the number of international CS master's students more than doubled, from 15,811 to 34,850.

Despite this, India’s belief in AI’s transformative power has not moved. Unlike other nations that saw a jump in optimism, India was one of just three countries—alongside Malaysia and Poland—where public perception of AI’s future impact did not increase between 2022 and 2024.

Compare that with Canada and Germany, where belief in AI’s life-changing potential grew by 17% and 15%, respectively. It’s a curious case of domestic scepticism in the face of global enthusiasm.

The investment lag

It’s not just the public that’s wary. India’s AI investment figures are dwarfed by global peers, even though 2024 saw a 28-percentage-point jump in AI adoption by organisations globally—from 49% in 2023 to 77% in 2024, as per the reports. Meanwhile, governments worldwide are writing big cheques: China has launched a $47.5 billion semiconductor fund, Saudi Arabia is steering a $100 billion AI push through Project Transcendence, and France has committed €109 billion. Canada, too, pledged $2.4 billion to bolster AI.

India’s own response came in March 2024 with the IndiaAI Mission—a $1.25 billion initiative to build over 10,000 GPUs through public-private partnerships, develop a national nonpersonal data platform, and promote homegrown AI models and deep-tech startups. The mission also emphasises ethical AI governance and aims to expand AI labs beyond metro cities.

While ambitious, the mission’s scale still lags other economies that are treating AI as a strategic, large-scale national priority.

India’s policy stance may also be feeding the lukewarm sentiment. Less than a month after issuing an advisory requiring tech firms to seek government approval before launching new AI models, the Ministry of Electronics and IT revised its guidelines in March 2024, following backlash from entrepreneurs and investors.

Under the updated rules, companies must inform users if their AI models are undertested or unreliable. While the ministry retained its focus on ensuring that AI models do not compromise electoral integrity or propagate bias, the episode reflects a deeper tension: the challenge of balancing regulation with innovation.

Industry insiders say this uncertainty has had a chilling effect on startups. “The guidelines, while well-intentioned, create ambiguity,” said a founder of an AI startup on condition of anonymity. “When you’re unsure of what will be permitted tomorrow, you stop building today.”

India’s AI paradox is hard to ignore. It’s supplying the world’s talent, growing skills at breakneck speed, and showing signs of regulatory maturity—yet the investment, belief, and momentum remain uneven at home.
As global AI adoption accelerates and governments double down on their bets, India will need to convert its talent edge into tangible outcomes—through clearer policies, deeper capital, and a stronger push to build for Bharat.

Otherwise, it risks remaining a back-end talent factory in a world sprinting toward AI-first innovation.