Where is India in the generative AI race?

at high stakes Racing for supremacy in the burgeoning field of generative AI, India’s bustling tech ecosystem is facing an uphill battle to catch up with the world leaders. Despite being home to one of the world’s largest startup ecosystems, the South Asian economy has yet to make a material impact on the rapidly advancing field of AI.

No local Indian contenders have emerged to challenge the dominance of the big titans of the language model like OpenAI’s ChatGPT, Google Ventures-backed Anthropic or Google’s Bard. “While there are more than 1,500 AI-based startups in India with more than $4 billion in funding, India is still losing the AI ​​innovation battle,” said analysts at Sanford C. Bernstein.

To their credit, many of India’s top startups are using machine learning to improve aspects of their business operations. For example, e-commerce giant Flipkart uses machine learning to refine customer shopping experiences, while Razorpay uses AI to combat payment fraud. Unicorn edtech Vedantu recently integrated AI into its live classes, making them more accessible and affordable.

Industry experts attribute the dearth of AI startups in India in part to a skills gap among the nation’s workforce. Now, the advent of generative AI could displace many service jobs, analysts warn.

“Among its more than 5 million employees, IT India still has a high mix of low-level employees like BPO or systems maintenance. While the AI ​​is not at the level of causing disruption, the systems are improving rapidly (our ChatGPT query provided a more evolved response within a few days),” the Bernstein analysts said.

Dev Khare, Partner at Lightspeed Venture Partners India, recently assessed the disruptive potential of AI and warned that jobs and processes in industries like market research, content production, legal analysis, financial analysis and various service jobs of IT could be affected.

However, for India, this disruption also presents an opportunity. A quick profit in the agricultural sector, which employs more than 40% of the country’s workforce, is challenging, and similarly, automation in the manufacturing industry may be unnecessary due to abundant and affordable labor.

Employment mix of low-skilled, medium-skilled and high-skilled workers at TCS, Infosys, Wipro and HCL (Image and data: Bernstein)

With the timely upgrading of skills and optimization of resources, the service sector stands to gain the most and boost productivity. The giant Indian consulting giants are already acknowledging this. Infosys, for example, revealed last month that it is working on several generative AI projects to address specific aspects of clients’ businesses. TCS, on the other hand, is exploring cross-industry solutions to automate code generation, content creation, writing, and marketing.

In response to this outlook, New Delhi has declared that India will not regulate the growth of AI, taking a different approach than many other countries.

“AI is a kinetic enabler of the digital economy and innovation ecosystem. The government is harnessing the potential of AI to deliver personalized and interactive citizen-centric services through digital public platforms,” India’s Ministry of Electronics and IT said last month.

Light of hope

With the more established segment of India’s startup ecosystem yet to make a big leap in the generative AI race, young companies are stepping up to the occasion.

A new generation of entrepreneurs is capitalizing on the excitement surrounding generative AI technologies. Startups like Gan, which enables companies to repurpose video at scale, TrueFoundry, which helps build ChatGPT with proprietary data, and Cube, which facilitates AI-powered customer service on social media, are among those leading the way. change.

The increased interest has prompted almost all hedge funds in India to develop investment strategies in the emerging space.

Anandamoy Roychowdhary, a partner at Surge, Sequoia India and Southeast Asia, rebutted that Indian startups have only just started exploring applications around generative AI, saying several have been working in this space for many years.

“However, what cannot be denied is the spectacular pace of projects and the creation of new companies after the launch of ChatGPT. The Sequoia India and SEA team have been early on this trend, having partnered with 7-8 AI companies in previous Surge cohorts,” he told TechCrunch.

Sequoia India and SEA are evaluating at least five companies in this space every week, he said.

Accel, another high-profile venture firm that has been operating in India for more than a decade, said on Wednesday that AI is one of the top two themes in the new cohort of its early-stage venture program.

However, some founders expressed concern that these AI startups are unlikely to focus on creating their own big language models due to a lack of funding and investor conviction to support such high computing and other expenses. infrastructure expenses.

One investor, who requested anonymity to speak candidly, warned that the current frenzy around AI deals echoes aspects of the 2021 cryptocurrency craze.

“Everybody wants to do genAI but nobody knows how/what to do. This is the crypto arms race all over again,” the person said. “I doubt that most Indian venture capitalists have really delved into and understood cryptocurrencies, because otherwise they wouldn’t have made so many absolutely bad investments.”

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