India emerges as a key investment hub for AI infrastructure and application development

Even as the US and China continue to attract a disproportionately high share of global investments in core AI, India is a sweet spot for investments in infrastructure and application layers of the AI technology ecosystem, opines Akhilesh Tuteja, partner & national leader, Technology, Media & Telecommunications (TMT) KPMG in India.

India’s strongest capabilities today lie in software, network platforms and data-driven intelligence, while opportunities remain to strengthen capabilities in advanced semiconductors and critical hardware ecosystems, he says.

“All three hyperscalers, the Google, Microsoft and AWS, have announced massive investments in India. This is largely going to drive data centre capacity and other things. Here India is getting a disproportionate share compared to the rest of the world. Similarly, there is huge domestic and foreign investment happening in the area of AI applications where people are building these applications on top of the frontier models that are there," Tuteja says.

Commenting on a recent report "The Power Beneath Connectivity: India’s path to telecom technology leadership" released by KPMG, Tuteja said the convergence of telecommunications, AI, semiconductors, cloud and digital infrastructure is redefining how value is created in the global technology ecosystem.

“As the foundation of the digital economy evolves from connectivity to intelligence, India has a unique opportunity to emerge as a creator of globally relevant technologies, platforms and intellectual property. Realising this potential will require sustained investments in innovation, advanced manufacturing and ecosystem collaboration to strengthen India’s position as a technology leader in the years ahead," he said.

According to the report, while India has already demonstrated its ability to build scale in digital infrastructure and manufacturing, the next phase of growth will require deeper participation in high-value segments such as semiconductors, software, radio systems, optical technologies and intellectual property (IP).

It recommends accelerating investments in innovation, strengthening domestic technology and component ecosystems, fostering IP creation, and deepening collaboration across stakeholders to build globally competitive capabilities. By pursuing these priorities, India has an opportunity to translate its market scale into sustained innovation, strategic resilience and global technology leadership, it says.

Tuteja considers programmes like telecom Production Linked Incentive (PLI), semiconductor PLI, Telecom Technology Development Fund and similar programmes as good components of India’s policy push towards the growth of the sector. However, he wants all these programmes to be looked at as very connected and integrated, as the value of the ecosystem is more than the sum of the parts.

The solution provided in the report for this ecosystem integration is to look at annual value-addition, exports, IP and supplier development outcomes across major schemes, while aligning incentives, testing infrastructure and trusted procurement.

It says that India’s progress from assembly-led growth towards deeper capability and greater value capture in the telecom sector can be measured by looking at the broader adoption of indigenous telecom platforms, commercial scale in RF and baseband chips, higher domestic value addition in components and modules and the conversion of announced investments into operational manufacturing capacity.