India Must Seize the AI Era or Risk Falling Behind, Economic Survey Warns

India faces a critical juncture in the global technology landscape, with the Economic Survey 2025–26 warning that the nation must rapidly transition from an IT services hub to a leading player in the artificial intelligence (AI) ecosystem. The report emphasizes that AI and computing power will define economic and geopolitical influence in the 21st century, much like oil and steel shaped the 20th century.

The Survey highlights “compute”—encompassing high-performance processors, graphics chips, energy systems, and essential minerals—as the new driver of global economic hierarchies. Control over these technological assets is becoming a decisive factor in international alliances, trade patterns, and strategic leverage.

Against the backdrop of rising US-China tech competition, the Survey stresses that resilience alone will not secure India’s position. Instead, it advocates for “strategic indispensability,” where India becomes an essential part of global value chains, making it difficult to bypass or replace. The report notes that initiatives such as US-led efforts to create a trusted AI ecosystem are reshaping global capital flows and technological leadership, with implications for emerging economies.

The Survey identifies two primary models shaping the AI race. Western nations rely on top-down strategies driven by large technology firms, concentrated intellectual property, and massive private investment. While powerful, this approach is capital-intensive and increasingly closed. By contrast, a bottom-up strategy—focused on distributed innovation, sector-specific applications, public digital infrastructure, and strong state coordination—is emerging across many other nations.

For India, the Survey recommends a bottom-up model tailored to the country’s strengths. Priorities should include applied AI in healthcare, agriculture, education, finance, logistics, and governance. Leveraging open-source tools, public datasets, and domestic innovation ecosystems can help India build practical AI solutions without depending solely on proprietary models.

The Survey underscores India’s competitive advantages: a large pool of highly skilled technical talent, substantial contributions to AI research, and one of the most AI-literate workforces globally. Additionally, India possesses vast, diverse domestic datasets spanning languages, geographies, and socio-economic groups, offering opportunities for high-impact applications in health, agriculture, urban planning, climate resilience, and public services.

However, the Survey cautions that without coordinated policy action, investment in computing infrastructure, secure access to critical minerals, and strong frameworks for data governance and innovation, India risks remaining dependent on foreign technology. “The window is narrow,” it notes, warning that delayed action could permanently limit the country’s technological sovereignty.