The fourth industrial revolution will be based on artificial intelligence which in turn depends on ‘data’. What are the factors affecting the location of AI industry globally? Where does India stand in this context? (15 Marks)

Mentors Comment:

  • ‘Data’  is the keyword here. It is responsible for the location of the AI industry. It is responsible for the slow growth of the Indian AI ecosystem. And it is the solution of making India a superpower in AI. 
  • In the intro, tell what is AI and how it will drive the next industrial revolution. 
  • Then in the first part, discuss the factors affecting the location of the AI industry globally. Points will be largely based on the availability of big data and the support of the government in funding the exosystem. Then other roles like availability of skilled personnel, a ready market for the tools of AI will be discussed.
  • Then discuss the scene of AI in India. First, discuss why India is having a slow pace of growth in AI tech despite leading in the IT field globally. Then discuss the advantages that India has in the AI field and how it’s turning its pace up.
  • Do not end the answer without giving the solutions as to what more India needs to do. Recently the draft data regulation bill was in the news. It talks of localizing data in India. That is an important point and do mention it. 


Artificial intelligence (AI) refers to the ability of a computer or a computer-enabled robotic system to process information and produce outcomes in a manner similar to the thought process of humans in learning, decision making and solving problems. The goal of AI systems is to tackle complex problems in ways similar to human logic and reasoning. It is being termed that the next industrial revolution around the globe will be based on AI. The industrial revolution moved the centers of physical power from human and animal bodies to machines. Now AI systems are set to transform our economic, social and political organization.

Factors for the location of the AI industry:

  • The availability of data is the key driver for the location of the AI industry anywhere.
  • Unlike most industrial technologies, AI does not develop in laboratories and then get applied by businesses. 
  • AI develops within business processes, as data are mined from digital platforms, and turned into intelligence.
  • This intelligence is sent back to produce more data and intelligence, in infinite loops. 
  • Any country’s AI therefore largely exists within its huge, domestically owned commercial digital/data systems. 
  • For example, in the U.S. it is with companies like Google, Facebook, Apple, etc and in China with Baidu, Alibaba, and Tencent.
  • Another factor that is key for the location of the AI industry is the role of patient capital, which in this instance seems to be coming from governments. 
  • Therefore nations like the USA, China, Russia, Israel, with deep pockets who are ready to invest in the AI industry are attracting the players to their lands.
  • Human capital, training and retaining talent has become a critical impediment to the development of the AI industry globally.
  • So the places which have trained experts for AI, are a great location for establishing the AI industry.

India and AI:


  • Indian startups in AI lack access to large data sets.
  • Tech giants such as Amazon, Google and IBM have larger data sets compared to Indian startups.
  • As operational costs are lower in India, at least in comparison to the US or Europe, using AI to harness efficiency gains here in India are a low-priority for enterprises
  • India is a great place for AI startups to experiment, but not a lucrative market

Advantage India:

  • Companies like Infosys, TCS, Wipro, are training their people on some of these new technologies.
  • There’s a growing base of AI research that’s happening at places like IIT Madras, and IISc
  • There are institutes that have the knowledge and talent pool, and we can find a lot of good people in a very quick time, compared to the US or any other place.
  • More and more startups are embedding AI in their technology stack and starting to supply AI for solving issues typical for India.
  • We have probably the second largest number of IT professionals in the world, and we’re good at re-training these people, we’re going to catch up soon

What needs to be done by India:

  • Some of these big investments have to involve the Indian government at times.
  • India needs to think a lot about data privacy and open data platforms. 
  • The availability of data sets that could be used to train AI engines is a pain point that the government could alleviate through laws on data privacy and data accessibility.
  • In this regard, the recommendations of the Srikrishna Committee on Data Protection is the right step which asks companies operating in India to store data locally.
  • Indian policymakers should be aiming at the highest levels of new value chains that AI will create in every sector.
  • Technologies should flow freely across the globe, and we must welcome global technology companies to help India’s digital development in the field of AI.
  • Data-based sectoral platforms, like in e-commerce, urban transport, agriculture, health, education, etc.should largely be domestic. 
  • India should treat its collective social/economic data as a strategic national asset, like our mineral resources

Such policy protection alone will ensure that we have large-scale data-driven Indian companies able to develop the highest AI in every sector, by employing huge Indian data to solve Indian problems. Once enough AI proficiency and strength have been developed domestically, it should then be used to go global. This is the route to becoming an AI superpower. 


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4 years ago


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4 years ago

Industrial Revolution 4 or IR 4.0 is the next stage of industrialization. Cyber-physical-biological systems are at its core. IR 4.0 includes a range of similar yet different types of advancements such as Artificial Intelligence, Internet of Things, Big Data and Data Science, Automation in Manufacturing and Service sector, new age medical procedures and diagnostics etc.

Artificial Intelligence is the capability of machines to respond, adapt and improve from interactions similar to living organisms. This is based on the models and algorithms which are ‘trained’ using vast amount of prior acquired data.

For example each click or interaction on the Amazon website will generate a ‘data point’ along with other parameters and variables. Such data points of thousands of users will give insight into the consumer behaviour which will then be used to ‘suggest’ products to consumers. Thus ‘data is the oil’ for IR 4.0, an quintessential component of AI.

Following factors affect the location of AI industry and position of India:

> Digitization level: high digitization in a country means more data generation both qualitatively and quantitatively. e.g. China, USA and India are highly digitized.

> Personal data regulation: lax privacy data norms means greater freedom to acquire and use personal data. e.g. Data regulation in China is weak compared to western countries. Indian laws are in developing stage and proper AI framework is being worked out.

> Trained workforce for AI industries: AI development needs bright minds who design and write codes and algorithms. India is well positioned owing to high number of science and engineering graduates.

> Government regulation in other areas like drone technology, financial sector regulations, transport regulation also affect the location of firms using AI in these fields. India is starting to develop policy framework for these areas with involvement of Home Ministry, Defence Ministry, Finance Ministry, SEBI, RBI etc.

> Market size: high enthusiasm to upgrade technology by indian industries and consumer demand also plays important role.

>National security issue: it plays increasingly important role in deciding the location of industries, e.g. the Huawei and 5G controversy.

Thus India has talent pool and required resources to benefit from IR 4.0. The need of the hour is to integrate and align clear policy frameworks. NITI Aayog’s mission on AI is praiseworthy.

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4 years ago

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