Editor Correspondence from September 18, 2025
September 18, 2025
In a significant move, India has extended invitations to global tech companies to invest substantially in its burgeoning AI sector. This invitation comes as countries like the US and the UK are making sizeable investments in AI, with Asia-Pacific countries, particularly China and Japan, also focusing heavily on government and private sector investments to drive AI and related technologies.
The AI race is intensifying globally, and India finds itself playing catch-up. The country has not kept pace with the initial development of Large Language Models (LLMs) and Generative AI. To remain competitive, India needs to encourage software companies and start-ups to scale up their AI efforts and infrastructure.
The GST reforms, coming into effect on September 22, aim to boost consumption and investment demand. However, if inventories are more than anticipated in firms, fresh investment or employment may not be stimulated. This is because consumption demand, an exogenous variable in the context of the GST reforms, could increase due to the rationalisation of GST, leading to a need for a sustained increase in capital expenditure from both the public and private sectors to cope with the enhancement in demand.
India has made efforts to reduce the imports of Russian oil, but if companies wish to enhance their savings or retained earnings, their investments could be affected due to the increase in consumption demand. The US trade team is urged to avoid implementing new rules and policies during the ongoing trade talks to facilitate a positive sentiment for resuming bilateral trade talks with India.
The ruling on the IBC (Insolvency and Bankruptcy Code) may undermine its core objective of timely resolution due to allowing creditors to file documents after a delay. Prolonging the tribunal process due to judicial discretion can introduce uncertainty and erode confidence of stakeholders adhering to strict timelines. If India does not act, it may continue to export talent that will power AI development in other countries.
The US has imposed a 50% tariff on India, and the country is urged to lift this unilateral tariff. The AI sector is a significant area of potential growth, and the lifting of tariffs could facilitate increased investment and collaboration between Indian and global tech companies.
In conclusion, India's AI sector presents a significant opportunity for growth and collaboration with global tech companies. However, to fully capitalise on this opportunity, India must address the challenges posed by the GST reforms, the IBC ruling, and the need to encourage domestic AI development. By doing so, India can position itself as a key player in the global AI race.
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