Driving growth: The transformative power of GenAI in India

Generative AI (GenAI) presents a transformative opportunity for India’s economy, with projections suggesting a potential contribution of US$ 1.2-1.5 trillion to GDP over the next seven years. By fully capitalising on GenAI technology and its applications across various sectors, India could potentially contribute an additional US$ 359-438 billion to the economy in the fiscal year 2029-30, which would result in a 5.9% – 7.2% increase in GDP compared to the baseline. Approximately 69% of the overall impact is expected to originate from sectors such as business services, financial services, education, retail, and healthcare.

India’s GenAI market is projected to surpass US$ 17 billion by 2030 from US$ 1.1 billion in 2023, growing at a CAGR of 48%, which depicts its economic potential. Despite the promising outlook, challenges such as accuracy concerns, copyrights, transparency issues, and operational changes need to be addressed. India’s readiness for GenAI adoption remains moderate, with challenges including a shortage of skilled personnel and unclear use cases. 

Source: Image credit: Pixabay

Generative AI, or GenAI, has taken centre stage in the fifth industrial revolution. Worldwide, IT behemoths and young startups are equally keen to leverage the incredible potential of GenAI, which is transforming work and life. The technology behind ChatGPT is revolutionising industries across the world. Instead of just analysing or classifying existing data, generative AI is able to create something entirely new, including text, images, audio, synthetic data and more, according to a note by Accenture.

From ChatGPT to DALL-E, generative AI applications are complex machine learning systems that have trained on humongous amounts of data (text, images, audio or a mix of data types) on a massive scale, according to the report. Now with recent developments, companies are able to build specialized image- and language-generating models on top of these foundation models. Moreover, these systems are adaptable to a variety of downstream tasks without the need for training. It is therefore no surprise that the potential of generative AI applications across industries will defy the imagination of even the best minds we have today.

According to Inc42’s latest report titled ‘India’s Generative AI Startup Landscape, 2023’, India’s GenAI market will be growing exponentially in the next few years. It is projected to surpass US$ 17 billion by 2030 from US$ 1.1 billion in 2023, growing at a CAGR of 48%. Currently, India has more than 70 GenAI startups, which raised more than US$ 440 million between 2019 and Q3 2023, according to the report. More than 80 Indian institutional investors are supporting these startups and propelling India’s GenAI ecosystem into the global spotlight.

“GenAI emerges as a pivotal force driving economic transformation across India’s diverse sectors. By automating repetitive tasks and fostering innovation, it promises to elevate productivity and efficiency, empowering businesses to make strategic decisions and deliver enhanced customer experiences. With its potential to create new job opportunities in burgeoning fields like data science and AI development, GenAI sets the stage for a dynamic workforce equipped for the digital age. As India embraces this technological revolution, it positions itself for sustainable growth and global competitiveness,” says Sumit Banik, a GenAI Consultant.

This incredible journey is influencing the future of next-generation technology through a combination of innovation, investment, and transformative power. Consequently, India is seen as a potential global powerhouse that’s driving forward the GenAI revolution. Here are a few salient data points from the rapidly expanding GenAI startup scene in India.

Key facts of GenAI startups
70+ Native GenAI Startups In India	US$ 440 Mn+ Raised By Native GenAI Startups Since 2019	1 In Every 3 Indian GenAI Startup Is Working In Code & Data Segment
81% GenAI Products From India Have Sector-Agnostic (Horizontal) Use Cases	Bengaluru Is Home To The Highest Number Of GenAI Startups In India	80+ Indian Institutional Investors Have Backed GenAI Startups
88% Indian GenAI startups are in seed stage	58% Indian GenAI startups were founded in or after 2021	71% Indian retailers plan to adopt Gen AI in the next 12 months

Source: Inc42, Gartner and EY

Economic Potential of GenAI 

Sector	Impact on sectoral GVA (%)	Addition to GVA due to Gen AI in 2029-30 (US$ Bn)	GenAI
Business Services	19-23	85-104	Document summarization, content generation, data capture, customer care, enhancing productivity, and reducing costs across various business functions
Financial Services	22-26	66-80	Enabling real-time fraud detection, risk management, lead conversion, and enhanced customer experiences
Transport and Storage	8-10	22-27	Optimise transport routes, enhance fleet management, intelligently schedule tasks, and revolutionise logistics efficiency
Education	8-9	18-22	Personalised tutors, crafting tailored learning paths, and assisting educators in curriculum design for optimised student engagement
Retail Trade	5-6	18-22	Hyper-personalized advertisements, creative content generation, product summaries, reviews, individualised recommendations, enhance customer engagement and facilitate seamless returns and warranty handling
Health and Social Work	16-20	15-18	Health record management, delivers personalised treatment plans, and aids in disease diagnosis through extensive patient data analysis
Construction	3-4	14-17	Generating project reports, design options, project management-scheduling, optimisation of supply chain and visualising material delivery schedules
Media	20-24	6-8	Automated content creation, product summaries, news writing, programmatic advertising, and content feeds for efficiency and tailored experiences.
Post and Telecom	7-8	6-7	Increased internet demands, optimising network operations and offering predictive maintenance for base stations
Pharma	7-8	4-5	Drug discovery/R&D, lab test report generation, marketing and advertising, No-Code website/app development

Source: EY, Inc42

Growth Drivers Of GenAI

India’s large consumer base for tech giants such as Google, Meta, and Snapchat creates a lucrative market for digital marketing, resulting in increased demand for digital creatives both now and in the future. Other major growth drivers for GenAI are as follows:

• Digitalisation and Cloud Computing: India ranks as the world’s second-largest internet user, with more than 759 million active internet users. Cloud computing in India is expected to account for 8% of GDP by 2026, with a potential increase of US$ 310 billion to US$ 380 billion.
• Availability of Structured Data: The internet has generated massive amounts of user and business data globally, amounting to 329 million terabytes (TB) daily.
• Advancements in AI Models: Future developments in this technology could expand its applications across a range of domains and industries, much as the 2017 breakthrough in transformer ML models by Google scientists paved the way for the development of today’s well-known GenAI models like ChatGPT and BARD.
• Workflow Automation: Automation will be crucial to business operations as India strives to achieve a US$ 5 trillion economy by 2030. Customer support positions have already been disrupted by the use of chatbots in top Indian startups and corporations.

Possible Downsides of GenAI

A significant portion of businesses are not fully prepared to address the risks associated with GenAI adoption, particularly in terms of mitigating inaccuracies in AI tools. GenAI, while offering significant benefits, also presents challenges and potential downsides for businesses in India. These are:

• Transparency Issues: The lack of transparency in GenAI models, especially as they grow in size and complexity, makes it challenging for businesses to track the genesis of the data used by these models.
• Operational Changes: The integration of GenAI into business operations may require significant adjustments, such as moving from time-and-material models to outcome-and-usage-based ones.
• Security Risks: Executives have expressed deep concerns about security risks associated with GenAI tools that could potentially jeopardise business operations.
• High Expense of GenAI Model Training: The hardware and infrastructure costs for training large language models are prohibitively high, as exemplified by the need for 285K CPUs and 10K Nvidia GPUs to train GPT-3.
• Issues of Bias and Copyright: Biases inherent in the data can be passed on to models trained on large datasets. A major challenge lies in ensuring fairness, as copyright issues are present in the content generated.

In recent years, the Indian government has been regulating emerging tech sectors like fintech, social media, and online pharmacies. Similarly, the Indian government has issued an advisory to AI platforms like Gemini and OpenAI, requiring compliance with IT rules on May 1, 2024, including labelling content fallibility and traceability. This move precedes the general elections, emphasising the need for responsible AI.

Sumit Banik adds, “for navigating the regulatory landscape surrounding GenAI, India must prioritise ethical considerations and collaboration to unlock its full potential while addressing challenges. Robust regulations safeguarding data privacy and promoting transparency are essential for fostering trust and widespread adoption. Moreover, fostering collaboration among stakeholders fosters responsible innovation, ensuring that GenAI advances align with societal values.”

He further adds, “As India strives to harness the benefits of GenAI while mitigating risks such as job displacement and bias, a concerted effort towards ethical development and inclusive collaboration will be key to realising its transformative potential.” The focus on responsible AI aims to balance innovation with ethical considerations, addressing challenges such as transparency, accountability, accuracy, and explainability in AI systems.

According to Ashok Kumar, CEO at ExTell Systems, “Regulations related to data privacy, genetic testing, health care standards, and intellectual property rights play a crucial role in shaping the landscape. Clear and supporting regulations can foster innovation, attract investment, and facilitate collaboration between industry and research institutions. On the other hand, overly restrictive or ambiguous regulations may stifle innovation and hinder the adoption of GenAI. It is therefore essential for policymakers to strike a balance between promoting innovation and ensuring the ethical and safe use of GenAI in India.”

Impact on India’s Economy

According to an EY report, as the global Gen AI revolution unfolds, India’s economy stands to gain between US$ 1.2 and US$ 1.5 trillion over the next seven years due to the potential for significant disruption and innovation brought about by this technology. An additional US$ 359–438 billion could be added to India’s GDP in the fiscal year 2029–2030 if the country fully embraced Gen AI technology across all sectors, according to a report titled “The AIdea of India: Generative AI’s impact on India’s digital growth.”

Mahesh Makhija, Technology Consulting Leader at EY India, “Organisations are swiftly adopting an AI-first approach to digital transformation, aiming to enhance customer engagement, increase productivity, and achieve greater agility in delivering digital capabilities using innovative foundation models and AI-first solutions.”

According to the EY analysis, GDP would rise by 5.9%–7.2% as a result of this in comparison to the baseline. According to the research, sectors such as business services, financial services, education, retail, and healthcare will account for approximately 69% of the expected impact due to increased employee productivity, operational efficiency, and much stronger customer engagement.

The EY report provided valuable insights into how different industries are preparing for the adoption of Gen AI. According to the results of a detailed survey of over 200 C-suite participants, 60% of organisations recognise the significant impact Gen AI will have on their business models. However, approximately 75% report a low to moderate level of readiness to reap the benefits of Generation AI.

These organisations are currently facing two major challenges: a shortage of skilled personnel (52% of respondents), and the availability of unclear use cases (47%). Surprisingly, only 36% of organisations view data as a potential risk associated with GenAI, according to the study.

While GenAI is still in its early stages, there is considerable optimism surrounding its potential. To fully realise its benefits, India must enhance government participation in its development and implementation. Additionally, fostering a robust computing ecosystem is essential to ensuring competitiveness and ongoing innovation in this rapidly evolving landscape.