E-Paper
Private sector must pull its weight on R&D
As AI development gets concentrated in the West, time is running out for India. The country’s private sector must improve its R&D showing.
Artificial intelligence is redrawing the global map of power, opportunity and inequality. This is the central concern of the 2025 Human Development Report, which argues that the real question is no longer whether AI will shape the future, but who it will serve and who it will leave behind. It treats AI not as a futuristic abstraction but as a political, economic and moral fault line running through the heart of global development.
For India, the policy choices we make today will define our role in the decades to come, whether we rise as a sovereign innovator or remain a subservient user in the evolving architecture of digital power. The report discusses how despite technological breakthroughs,the rate of human progress is the slowest it’s been since the report began 35 years ago. Gains in life expectancy, education and income have plateaued and in some regions, reversed. Pre 2020 trends suggested that the global HDI would surpass 0.8, achieving “very high” status by 2030.
However, current projections based on the 2021-2024 trajectory push back this milestone by several decades. In the wake of overlapping crises of the pandemic, the climate crisis, and conflict, the gap between very high and low HDI countries has widened. The ongoing progression of AI risks entrenching this global inequality further. The core building blocks of AI,compute, talent, data, and capital,are concentrated in the hands of a few firms and nations in the Global North,driving a new regime of digital dependency.
The report finds that 60-95% of recent AI performance gains now come from scaling compute, not better algorithms. This shift has turned compute infrastructure into the new currency of AI power, fuelling a global race for hardware dominance. NVIDIA makes 90 percent of the chips powering today’s AI systems. The US hosts nearly half of all global data centres, and big tech companies like Amazon, Google, and Microsoft now design their own chips, controlling the entire AI stack. Investment reflects this control. In 2024, the US dominated global private AI investment with $70.2 billion, ten times more than China, while the rest of the world was left with just $0.7 billion.
India is not lacking in talent, ambition, or technological potential. We rank in the global top ten for AI readiness and lead in self reported AI skill penetration. The brain drain is also beginning to reverse: 20% of Indian AI researchers now remain in the country, up from near zero in 2019. However, we are building upward on scaffolding we neither own nor anchor. We sit at the table as a data rich, decision poor consumer. India has yet to produce a single foundation model, even as the US, China, and Europe surge ahead. In the global AI patent landscape, we remain almost invisible. Meanwhile, our economy is still tethered to a tech export model that AI is rapidly upending. The IT-BPM sector, which contributes 7.5% to GDP, employs 5.4 million people, and generated $194 billion in export revenue last year, faces an uncomfortable truth: GDP growth is not a shield. Beneath the headline numbers lies a quiet crisis of stagnation and complacency. Industry leaders like TCS, Infosys, Wipro, and HCL spend just 0.4-1.3% of their revenue on R&D, far behind global tech giants that invest anywhere between 11% and 28%. These firms rely heavily on basic coding, analytics, and call centre support, precisely the kinds of routine, repeatable tasks that generative AI is poised to automate first. As The Wall Street Journal warns, these jobs aren’t at risk years from now, they’re replaceable in weeks.
The government has responded with large scale public investment; ₹10,372 crore for the India AI Mission, and 18,000 GPUs, but public funds alone won’t close the gap. The private sector contributes less than 40% of India’s already meagre R&D spend, which stands at just 0.64% of GDP. At a moment that demands bold bets, the private sector is still playing defence.
Globally, matching public funds with private R&D has proven effective. OECD studies show $1 of public investment can generate up to $1.70 in private R&D. In Mexico, matching grants led to a 40-50% jump in productivity and jobs. India must act now. We need to foster indigenous computer infrastructure, and support foundational model development,not just in research labs, but across universities, startups, and public institutions.
Rupee for rupee matching grants, along with stronger R&D tax credits can push private firms to invest, not just outsource. As the UN Secretary General warned, “We must never let AI stand for advancing inequality.” The global innovation gap is an epistemic one. Nations that don’t control AI development today risk becoming permanent rule-takers tomorrow.
Anugraha John writes on public policy. The views expressed are personal.
