Riding high on the AI wave, are Indian tech startups missing the bus on innovation? – The Economic Times

Synopsis

Indian AI startups have been at the forefront of technological advancements, but many are missing out on the true essence of innovation, prompting a deeper introspection within India’s tech ecosystem.

In January 2021, India witnessed an unprecedented surge in startups dedicated to exploring the uncharted realms of Metaverse, marking the beginning of an exciting two-year journey that would redefine the country’s technological landscape. By November last year, India’s tech sector was abuzz with several startups unveiling unique adaptations and applications of OpenAI’s language model-based chatbot, ChatGPT. The application’s versatile

In January 2021, India witnessed an unprecedented surge in startups dedicated to exploring the uncharted realms of Metaverse, marking the beginning of an exciting two-year journey that would redefine the country’s technological landscape.By November last year, India’s tech sector was abuzz with several startups unveiling unique adaptations and applications of OpenAI’s language model-based chatbot, ChatGPT. The application’s versatile capabilities quickly became the talk of the town, with its text-based interactions finding their way into the conferences, events, and high-stakes board meetings.Clearly, India’s tech startup landscape has been on a rollercoaster ride since 2021, dotted with several ups and downs along the innovation curve. While the surge in innovation and adaptation underscores the country’s position as a vibrant hub of technological creativity, it raises an important question as well: Are tech startups driving innovation, or are they merely riding the artificial intelligence (AI) wave? According to industry experts, while AI startups have been at the forefront of technological advancements, many are missing out on the true essence of innovation, prompting a deeper introspection within India’s tech ecosystem.Myopic visionThere are roughly 1,000 AI startups in India currently, up from 130 in 2017, according to Tracxn and Nasscom data, accounting for only 3.3% of the total number of startups globally. As per a report by International Data Corporation (IDC), the country’s AI market is expected to touch USD7.8 billion by 2025, clocking a compounded annual growth rate of 20.2% since 2020. However, despite the rapid growth in the AI startup ecosystem, young companies are not doing as well as their global counterparts. There are several reasons for this:First and foremost, many Indian startups are primarily concerned with short-term profits rather than fostering long-term innovation. Young businesses often face pressure from investors who demand quick revenue generation, forcing them to prioritise immediate gains over long-term research and development efforts.Second, a significant number of Indian startups are still in the learning phase when it comes to AI. They lack the expertise required to develop genuinely groundbreaking AI applications, resulting in inability to harness the full potential of this technology.Third, a prevalent trend among Indian startups is the replication of existing AI technologies rather than venturing into uncharted territory. This approach is understandable, as mimicking existing solutions is less risky and more cost-effective than developing new ones. However, it also means that Indian startups often fail to contribute to the global AI innovation ecosystem.A recent study by Indian Venture Capital and Private Equity Association (IVCA) highlights a decline in investment in Indian AI startups, down to USD1.1 billion in 2022 from USD2.1 billion in 2021 even as their global counterparts raised USD78.9 billion in 2022. This drop can be attributed to increasing caution among investors stemming from the lack of significant breakthroughs by Indian startups.Missing: creative solutionsA recent study by Nasscom reveals that more than 80% of Indian AI startups are working on solutions that have already been pioneered by companies in the US and China. This lack of originality is hampering the growth of India’s AI industry.Further, insufficient investments in research and development (R&D) is another cause of concern. According to a World Bank report, India’s R&D spending is alarmingly low at 0.7% of the GDP, significantly below the global average of 2.4%. Another revelation comes from a study conducted by the Indian Institute of Science, which says only 10% of Indian AI startups have created their own algorithms while others are relying on open-source or commercial solutions.Additionally, the paucity of high-quality research papers produced by Indian AI startups is another indicator of their struggles to keep pace with global innovation. According to the Allen Institute for AI, India ranked 10th globally in terms of AI research papers published in top academic conferences and journals in 2022, behind the US and China.Indian companies filed only a small fraction of the total AI patents submitted in 2022, as reported by the World Intellectual Property Organization. In a year when AI patent applications rose to 63,000 worldwide, India’s contribution stood at a mere 2,500. The US led patent filings with 27,000 applications, followed by China with 16,000 applications.104921659The final cutThe number of AI patent filings is not necessarily a good measure of the quality of AI research as a country may have many patent filings but still lag others in terms of innovation.The fervour for technological advancements in India has nonetheless been palpable, with the country’s burgeoning startup ecosystem showing no signs of slowing down as entrepreneurs and innovators continue to push the boundaries of possibilities.In this context, it’s imperative on the government’s part to provide support for AI startups. It could include funding for R&D, tax breaks, and other incentives for startups that are developing new AI technologies. Clearly, the time is ripe for India’s rise as an innovative AI hub. And we need to act now!(Graphic by Sadhana Saxena)