Cheaper Foreign AI Subscriptions Could Deepen Market Dominance, Raise Entry Barriers for Indian Players: CEA Nageswaran

At a time when India is still in the nascent stage of developing AI models, cheaper subscriptions to foreign AI models could create intense competition for the country. It will further lead to massive data consumption from over 700 million potential Indian users, said Anantha Nageswaran, Chief Economic Advisor to the Government of India, on Tuesday.

“A ₹399 per month subscription of OpenAI is now valid for an entire year. Obviously, this will cause subscriber numbers to surge. But look at the implications: it becomes increasingly difficult for a late entrant to compete. The implications are profound both personal and sovereign because we have no control over where that data goes, who accesses it, or for what purposes it is used,” he said.

Nageswaran also noted that AI is evolving to be automation-centric rather than human-centric, leading to large-scale replacement of labour. “Many of the jobs that were previously offshored to developing countries can now be done by AI. This may help developed countries deal with their aging populations in a macroeconomic sense but it doesn’t address intra-country inequality in those nations,” he added.

He emphasised that the productivity improvements that come from AI may not benefit workers; rather, they will likely accrue to the owners of capital and hence it is widening societal differences.

India’s limited computing power

The CEA highlighted India’s disadvantage in commanding only a fraction of the computational resources available to countries like the United States and China.

“We do not yet have the computing or GPU capacity that countries like China or the United States possess. We only command a fraction of the global computational resources. This puts us at a disadvantage when it comes to developing indigenous, data-centric AI models whether large language models (LLMs) or others that can compete with those trained on foreign datasets rooted in very different cultural contexts,” he added.

With India home to the world’s largest youth population, Nageswaran underscored the need for policies that encourage young people to pursue careers less vulnerable to AI-driven disruption. Nageswaran cited the example of the COVID-19 pandemic, noting that public policy could not be dictated solely by epidemiologists. Similarly, he cautioned that if AI policies are shaped only by technologists, it could lead to economically and socially harmful outcomes.

“Decisions on where and how AI should be deployed must ultimately rest with the elected political executive and the administrative machinery, which can weigh trade-offs and set boundaries just as we did with nuclear technology,” said Nageswaran.

He also noted the need to consciously define the limits of AI deployment, even if doing so invites concerns about competitiveness. Nageswaran, was speaking at a webinar organised by the Indian Council for Research on International Economic Relations (ICRIER) on how Artificial Intelligence can foster inclusive and sustainable job creation, productivity growth, and the policy choices shaping this future.