Can India catch up with the US and China in the AI race?

Imagine hopping into your car and saying, “Take me to work”, and your AI-powered self-driving car gets you there safely—all while you sit back and relax. This is no longer a thing of the future. This is AI in action—seamlessly integrating into our daily lives.

AI is transforming industries, economies, and governance across the globe. And now India is also joining the race and accelerating its AI efforts. While India entered much later than the global tech leaders, as countries like the USA and China have been investing heavily in AI research and infrastructure for years, India’s momentum in the AI space is growing.

But the question is: Will India be able to compete with the US and China in the AI race?

Let’s find out!

The global AI landscape

The global AI market is witnessing rapid growth. In 2024, the AI market was valued at $184.0 billion and is projected to reach $243.7 billion in 2025. It is expected to grow at a 27.7% annual rate and reach a market size of $826.7 billion by 2030.

But what is driving this growth?

The expansion is attributed to several factors, including technological advancements, increased adoption of AI technologies across various industries, continuous research and innovation by tech giants, and substantial investments.

Talking about investments, the USA leads the charts in AI investment and innovation. It has invested over $3 trillion to build overall AI capacity from chips to AI models. Following America is China, a distant second, which has invested over $1 trillion in AI development. So far, much of the global race for AI leadership is between these two countries.

While other nations are bullish on AI's future and trying to develop homegrown AI technologies and models, they are far behind the global leaders. Before we discuss India’s AI ambitions and status, let’s understand what is the current status of the AI market in the US and China.

AI landscape in the US

The US stands out as the most advanced AI ecosystem. It leads in fostering high-quality AI research, developing cutting-edge machine learning models, and attracting substantial private investment in the AI sector.

It has a dominant market share in the AI industry and is expected to have a market size of $66.2 billion in 2025. The US AI market is growing due to advanced technological infrastructure and massive investment in R&D. The country is home to major tech giants like Google, Amazon, and Microsoft, who are investing heavily in AI innovations. It also has a robust pipeline of newly funded AI startups.

For many, AI is almost synonymous with ChatGPT, which is a generative AI (GenAI) chatbot developed by OpenAI, a US-based company. This says a lot about the US's growth in the AI industry.

AI landscape in China

While the US is a market leader, China is giving it a tough fight with its AI startup, DeepSeek. China also leads in AI patenting, having produced more AI-related patents than the US, according to Stanford’s Global Vibrancy Tool 2024.

As per media reports, China has committed to invest $140 billion to boost AI growth and is expected to invest about $1.4 trillion by 2030. China’s major companies like Alibaba, Baidu, and several new startups are contributing to AI growth.

China also has various other advantages like data volume, energy and AI talent. It is also promoting AI through AI education. China is growing exponentially despite restrictions on chip exports by the USA.

China is also growing in terms of AI usage, with every 6th internet user in China using GenAI products. As of June 2024, China had reached 230 million AI users. The Chinese AI industry has more than 300 GenAI products registered, and over 4,500 AI-related companies which are boosting the AI ecosystem in China.

India’s AI awakening

India has long been a sleeping giant in AI, but it is now beginning to stir. Recognising AI’s strategic importance, the Indian government launched the IndiaAI Mission in March 2024 with a total budget outlay of ₹10,372 crore ($1.2 billion) for 5 years.

In the Union Budget 2025-26, AI funding received a significant boost, with a budget allocation of ₹2,000 crore for India's AI mission, up from ₹806.8 crore in the previous budget. This budget will be used for indigenous AI research, innovation, and overall industry growth. With this massive funding boost, India now has a cumulative AI-related budget allocation of ₹4,349.8 crore, which is the largest funding the country has gotten.

India’s aim is to lower the dependency on foreign AI solutions and boost its own AI capabilities, promoting the vision of “Make AI in India, Make AI work for India”. To support this, India is building its own foundational AI Large Language Model (LLM), which will help to cater to the country's linguistic and cultural diversity. Through this project, India is set to launch at least six indigenous AI models in the next 4-8 months—akin to ChatGPT, DeepSeek and Google Gemini.

Besides, India is also working on building its own AI talent pools. As per NASSCOM data, India is growing an ecosystem of over 4,500 AI startups. The government is also investing ₹500 crore to establish a new Centre of Excellence in Artificial Intelligence for education and five National Centres of Excellence for AI skilling. This comes at a time when global AI education investments are surging, with China dedicating $2.1 billion, the US investing $1.8 billion, and South Korea committing $1.3 billion.

PM Modi’s address at the AI Action Summit 2025

Prime Minister Narendra Modi recently addressed the AI Action Summit in Paris, emphasising the need for global cooperation in AI governance. His speech underscored India’s vision of responsible AI development.

Addressing the summit, he said, “India is ready to share its experience and expertise to ensure that the future of AI is for good and for all." Furthermore, highlighting the transformative potential of AI, he said, “We are at the dawn of the AI age that will shape the course of humanity.”

The private sector steps up

While the government is doing its part, the private sector has also stepped up to support AI growth in the country. Leading Indian conglomerates are already making significant AI bets:

• Reliance Industries in partnership with NVIDIA is building the world’s largest data centre in Jamnagar, Gujarat. They are also developing AI supercomputers and large language models (LLMs) to support India’s multiple languages.

• Adani Group is investing $4 billion to expand its data centre capacity of 1 to 1.5 gigawatts within the next one to two years.

• Nxtra (by Airtel) and Yotta Data Centres are also investing in AI-focused facilities in India.

With these remarkable initiatives, is India on track to become the next AI leader?

Well, let’s look at some stats!

India’s AI market is set to grow 5x in the next six years. According to an EY report, AI would contribute $1.2-1.5 trillion to India’s GDP between FY24-30, increasing India’s GDP growth rate by 1%.

While India’s AI industry is making significant strides, it still lags in a few areas. Let’s look into the reasons why India is still facing setbacks.

The roadblocks to India’s AI ambitions

One of the pressing concerns is India's low investment in R&D compared to global leaders. India allocates only 0.64% of GDP to research, much lower than China’s 2.4% and the US’s 3.5%. This funding gap remains a challenge to build large resource-intensive AI models like GPT-4 or Gemini by Google that require substantial capital and computational resources.

But money isn’t the biggest hurdle—talent is. While India has no shortage of AI brainpower, the problem is many of these top AI researchers and engineers reside abroad, fuelling innovation in Silicon Valley instead of India.

Another challenge is export restrictions imposed by the US on exporting high-end graphics processing units (GPUs) to India, which are essential hardware for training AI models. However, India is addressing this challenge by securing 18,693 GPUs for research and model development from a consortium of ten companies, which also includes local sourcing from companies like Yotta Data Services, E2E Networks, Tata Communications, and Jio Platforms.

While India is showcasing an impressive growth trajectory, if it wants to position itself as a global AI leader, it needs to work on the roadblocks otherwise, the ambition will remain a distant dream.