India’s AI adoption surges, poised for explosive growth

India’s business landscape is experiencing a significant shift driven by artificial intelligence (AI). A recent study by Teamlease Digital reveals that AI adoption across key sectors has reached nearly 48% in FY24, with projections indicating a further increase of 5-7% in FY25. This rapid growth positions India as a promising market for AI solutions.

The evolving landscape of AI adoption in key Indian sectors signifies a paradigm shift towards innovation, efficiency, and competitiveness.

Artificial Intelligence

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AI market size was estimated at US$ 6 billion in 2023, expected to reach US$ 20 billion by 2028, at a CAGR of 26%. Additionally, 60% of the AI market share is held by IT service providers, 8% by captives and global capability centres (GCC), and nearly 7% by the IT-enabled service (ITeS) providers.

“AI adoption in India is yet to mature compared to global markets such as the US. This is partly due to a talent gap of close to 50% in India. While the country has about 4.2 lakh AI professionals, the need is for six lakh professionals. Countries like the US have far more advanced infrastructure in place as well as more robust funding for startups,” said Krishna Vij, business head, Teamlease Digital.

“The government policies, the ethical considerations, and the need for adapting to and implementing AI are much easier in the US and in a global scenario that is still evolving in India,” Vij added.

India is still focusing on enhancing its existing portfolios towards AI and formulating its policies accordingly, which will require a lot of government support.

The adoption of AI could have a US$ 500 billion potential impact on India’s gross value added (GVA) by FY2026, according to estimates made by the IT industry body Nasscom.

Ahead of schedule, the Indian government authorised the provision of more than Rs 10,000 crore for the India AI Mission, which aims to “bolster India’s global leadership in AI” by promoting the growth of compute capacity, AI expertise, and innovation.

Sector-wise Adoption Trends

The rate of artificial intelligence (AI) adoption in key industries across India reached approximately 48% in FY2024, with expectations to expand by an additional 5-7% in FY25, data from staffing firm Teamlease Digital showed.

“Nearly 75% of organisations across various sectors are actively considering integrating AI into their operations within the next year,” Krishna Vij, business head, Teamlease Digital, told ET.

The study highlights a sectoral disparity in AI adoption. The Banking, Financial Services and Insurance (BFSI) sector leads the pack with a staggering 68% adoption rate, followed closely by the tech industry (60-65%). This trend reflects the immense potential of AI in streamlining financial processes, fraud detection, and risk management.

The healthcare and pharmaceutical sector is another early adopter, with an impressive 52% of companies leveraging AI. This translates to advancements in medical diagnosis, drug discovery, and personalised patient care.

The Fast-Moving Consumer Goods (FMCG) and retail sectors follow with a 43% AI adoption rate. AI-powered analytics can optimise supply chains, personalise marketing campaigns, and enhance the customer experience.

Manufacturing, despite lagging behind at 28%, is poised for significant growth in AI adoption. AI solutions can revolutionise production processes, improve quality control, and optimise resource allocation.

The study also identifies sectors with lower AI adoption rates. Infrastructure and transport currently sit at 20-22%, with media and entertainment at 10-12%. However, the potential applications of AI in these sectors are vast, such as smart city management, traffic optimisation, and personalised content recommendations.

Despite its rapid progress, India faces challenges in its AI journey. A major hurdle is the talent gap, with a shortfall of nearly 50% in skilled AI professionals. Additionally, India’s infrastructure and access to funding for AI startups require further development.

The government has recognised these roadblocks and is taking proactive measures. The recent allocation of over Rs 10,000 crore towards the India AI Mission is a testament to this commitment. This initiative aims to bridge the skill gap, expand AI infrastructure, and foster innovation within the AI ecosystem.

Looking Ahead

The Indian AI market is demonstrating a promising future. With continued government support, increased talent pool, and growing investments, India is well-positioned to become a global leader in AI adoption across various sectors. As industries continue to harness the power of AI, collaborative efforts between the public and private sectors, along with a focus on talent development and policy frameworks, will be instrumental in driving sustainable growth and technological advancement in the Indian business ecosystem. This will not only unlock significant economic benefits but also position India at the forefront of technological innovation.

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