Why AI Can Be a Major Driver of India’s Growth — A Personal Note

I have been writing about India’s IT story for years—its talent, its cost advantage, its Global Capability Centres (GCCs), and the idea that India could become the "Brain Factory of the World." Watching the recent waves of AI activity, I feel a mix of validation and urgency. AI is not just another technology trend; it is the connective tissue that can convert India’s established strengths into a sustained growth narrative.

Below I lay out, from my perspective, why AI can be a major growth driver for India, what makes the moment different, what risks we must manage, and how several recent developments already point us in the right direction.

1) The economic case: scale, productivity and exports

India’s IT and BPM industry is already a cornerstone of national growth. Recent industry overviews project continued expansion in revenues, exports, cloud adoption and employment—numbers that show a sector poised to multiply impact if AI is harnessed effectively Indian Information Technology Sector and Its Growth.

AI turbocharges three levers at once:

• Productivity: AI can free large amounts of human time from repetitive tasks, letting our engineers, analysts and domain experts focus on higher-value design, product and research work.
• New exports and products: Indian firms can move up the value chain—from services and BPO to productized AI solutions, domain-specific models, and IP that earns recurring global revenue.
• Jobs and capabilities: As GCCs expand and companies re-skill, AI creates both specialized roles (ML engineers, data platform architects) and broader productivity multipliers across sectors.

The numbers are persuasive: government vision, demand for cloud and compute, and expanding public cloud markets make this a huge opportunity—if we convert capacity into scalable products and offerings IBEF.

2) This time is different: infrastructure, policy and focused programs

A decade ago, India’s advantage was primarily wage arbitrage plus high-quality engineers. Today, three big changes matter:

• Compute & infrastructure: National initiatives are creating compute access, data centre investments and GPU pools that reduce entry barriers for startups and researchers.
• Policy focus: IndiaAI and related government commitments direct funding, compute subsidies and Centres of Excellence toward sovereign capability building.
• GCC evolution: Many multinationals are transforming their India centres into innovation hubs focused on AI, analytics and product development.

These shifts change the business model: where earlier we were largely execution-led, now we can be innovation-led, building IP and models fine-tuned for Indian and global markets India AI Mission receives 180 proposals for building foundation models and the GCC evolution I have tracked over the years GCCs as next-gen innovation hubs.

3) People, governance and the human side of AI

Technology alone won’t deliver growth. HR and people strategies are central. The recent HR trends research emphasizes that HR must be at the AI leadership table, guide human-centered governance, and help reinvest time savings into learning and innovation 11 HR Trends for 2026: Shaping What’s Next.

This resonates with my long-held view: talent plus deliberate reskilling are the multiplier. We must build programs that:

• bring HR into AI Centers of Excellence,
• create clear reskilling pathways and internal talent marketplaces,
• measure adoption and human outcomes (not just cost-savings).

If HR treats AI as a people-first transformation—rather than just a cost lever—India will see better adoption and less fear-driven disruption.

4) Capital and markets see AI as thematic growth — an investor view

The investment community is already repositioning around AI themes: infrastructure, compute, chips, cloud and the “picks-and-shovels” that enable models at scale. That’s a sign: large pools of capital can accelerate the industrialization of AI in India if we align investments with national priorities and local talent BlackRock Insights on AI and thematic opportunities.

When international investors and asset managers call out AI infrastructure as a multi-year thematic, they’re signalling sustained demand for compute, data centres and enterprise AI solutions—areas where India can both consume and supply.

5) Risks we cannot ignore: governance, bias, technostress and geopolitics

AI is powerful, but it carries risk:

• Bias and fairness: Models trained on global data can misrepresent local contexts. We need localized datasets, audit frameworks and inclusive governance.
• Technostress and FOBO: People worry about obsolescence. HR must monitor engagement and create visible reskilling paths so AI becomes empowerment, not displacement AIHR trends on technostress & FOBO.
• Geopolitical friction: Tariff wars, data sovereignty requirements and cross-border restrictions complicate export strategies. We must build both sovereign capabilities and collaborative partnerships to navigate this It’s an Era of tech Fights.

6) What India should double-down on (my practical view)

• Invest in compute and commons: subsidized GPU access and national datasets lower the barrier to entry for startups and researchers.
• Build domain-first models: healthcare, agriculture, regional language education—these produce tangible value and exportable IP.
• Strengthen AI governance: human-centered standards, transparency, and explainability that HR and ethics councils can operationalize AIHR’s governance guidance.
• Empower GCCs as innovation spokes: incentivize multinational centres to build product lines from India, not just delivery functions Global capability centres as innovation hubs.

7) A personal reflection — why my older themes feel validated today

If you’ve read my earlier posts, you’ll notice a consistent thread: I predicted India’s strength would be our brainpower, not merely low wages. I urged the nation to become a "Back Factory" or the "Brain Factory of the World" long before AI became mainstream India: the BRAIN FACTORY of the WORLD. I also wrote about outsourcing, GCC hiring and the need to convert talent advantage into higher-value exports IT Outsourcing rising — Silver Lining.

The core idea I want to highlight is simple and personal: take a moment to notice that I had brought up these thoughts years ago. I had predicted the centrality of India’s talent, proposed ways to capture it, and urged policy and industry to think bigger. Seeing how AI and policy initiatives (IndiaAI, sovereign LLM support, compute pools) are unfolding now is both validating and urgent. Those earlier ideas still hold value—and they deserve renewed attention because the window to convert potential into lasting economic change is open now No Claims: Just Comparison.

Closing thoughts

AI gives India a rare combination: a deep talent pool, expanding infrastructure, focused policy, and global market interest. If we commit to building sovereign capabilities where needed, unlock public-private partnerships, and treat the human side of AI as a central part of strategy, then AI can be the engine that moves India from high-value services to high-value products and intellectual property.

This is not just about GDP percentages or export figures. It’s about creating better jobs, more resilient companies, and technologies that reflect our languages, cultures and values. The time to act is now.

---

Regards,
Hemen Parekh