India’s relatively late entry into AI offers an "underappreciated advantage", allowing it to avoid energy-intensive and financially-risky models adopted by other early mover nations, and instead pursue more resource-efficient and inclusive AI path aligned with the country's public objectives, the Economic Survey said on Thursday.
The Survey dedicated a full chapter to `Evolution of the AI Ecosystem in India', the sharp spotlight on the topic itself signalling the importance of the transformational technology for India and its policymakers.
It asserted that questions of accountability and safety cannot be deferred, as it declared that regulation, data governance and safety will have to evolve in parallel with deployment, not in its aftermath.
1 January 2026
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The chapter examines how AI is reshaping the global economy and outlined a pragmatic strategy for India, amid "rapid technological change and persistent uncertainty".
"India’s position as a relatively late mover in the AI transition also confers an underappreciated advantage. Early adopters who scaled AI under conditions of a regulatory vacuum and cheap capital have now locked themselves into circumstances that are very difficult to back away from. This includes a commitment to energy-intensive architectures that are detrimental to the environment and mounting financial commitments with unclear revenue pathways," the document said asserting India, on the other hand, has the benefit of hindsight.
India can, hence, avoid dependencies that are difficult to unwind.
"This allows India to design AI systems that are more resource-efficient and aligned with public objectives from the outset, sequencing regulation alongside deployment. In this sense, late adoption need not imply lagging ambition. Properly leveraged, it offers the country the opportunity to pursue a more resilient and inclusive AI trajectory," the survey said.
For India, it said, Artificial Intelligence does not pose a one policy question, but rather a series of choices that must be made under conditions of heightened uncertainty and resource constraints.
The Economic Survey 2025-26 argued that the central challenge for India is in what it builds domestically, what it sources globally, what it regulates early, and what it deliberately allows to evolve.
"The contours of the global AI ecosystem make clear that passive consumption is the riskiest position of all," it emphasised.
India’s comparative advantage in the AI era does not lie in replicating frontier-scale model development, though valuable process knowledge can be gained from the current efforts already underway.
"The country’s strengths lie in application-led innovation, the productive use of domestic data, human capital depth, and the ability of public institutions to coordinate distributed efforts. A bottom-up strategy anchored in open and interoperable systems, sector-specific models, and shared physical and digital infrastructure offers a more credible pathway to value creation than a narrow pursuit of scale for its own sake," the Survey mooted.
That said, openness without careful management of AI development and usage is insufficient.
"As AI capabilities diffuse into critical sectors, questions of accountability and safety cannot be deferred. Regulation, data governance and safety will have to evolve in parallel with deployment, not in its aftermath," it said.
The choices made over the coming few years will determine whether AI deepens existing structural divides or becomes a tool for broad-based productivity and dignified work.
India’s task is to ensure that AI development remains aligned with its developmental priorities and its long-term ambition to achieve economic resilience. The opportunity is substantial, but conditional, it said adding, a deliberate and coordinated policy, accompanied by a willingness to act, is required before path dependence sets in.
