Transformer by Mint | Everyone wants a slice of ‘our’ AI, but what really is it?

With each passing week, we’re seeing new chapters being written as some of the world’s biggest companies take on each other to make new headlines in AI. While much about AI is driven by headlines today, this week, Mint reported on one phenomenon that doesn’t appear to be a fad—the rise of sovereign computing.

If you’ve been an active participant in the AI news cycle, you’d have recognized that I called it sovereign ‘computing’ and not sovereign ‘cloud’ or ‘AI’. The reason for this is that for companies today, the general push is to break the sweeping connections of the internet into fragments and create air-gapped walls online.

This, to be sure, isn’t just figurative. From physical data centre investments to laws and regulations, every top economy has its own philosophy behind what it believes will be the future of technology in this world. India, too, is right up there with all the others.

Last week, we welcomed Satya Nadella to New Delhi, Bengaluru, and Mumbai (we also welcomed Lionel Messi, but that’s a story for another day). The top Big Tech leader announced investments into the country worth $17.5 billion (that’s a stunning ₹1.6 trillion), most of which will go into expanding Microsoft’s India data centres. A day later, Amazon announced investments of $35 billion, including data centres.

As India builds its data centres, the department for promotion of industry and internal trade (DPIIT) released a set of proposals to have tech makers pay publishers for using the latter’s content when making an AI model.

All of this is designed to make AI work for India, in India. This perhaps explains why the likes of Airtel, Tata Consultancy Services, and Larsen and Toubro are in a battle for India’s sovereign tech armoury. But it also explains why Google, Microsoft, and Amazon are in a three-way battle for it, too. Hyperlinked here are a number of excellent stories to walk you through this nascent showdown.

A landmark $120-billion research fund is finally ready

In the middle of this year, following multiple submissions by industry consultants, a ₹1 trillion incentives scheme was proposed to boost research and development (R&D) projects nationwide. The idea: boost private-sector R&D to create innovative products the way US Big Tech and other industries have flourished.

Case in point: TCS, one of India’s largest spenders of private-sector R&D, doles out just over $300 million a year in R&D funding. That’s just over ₹2,800 crore in R&D budget—ask anyone in academia, and they’ll tell you that this, in itself, is more than enough for many projects to meet their targets.

But it’s no longer about meeting targets. So far, India’s prowess in the tech world has been driven by services. India, over the past two decades, has come to be known as the world’s tech back-office. And we made good money in this—today, India’s IT services industry is close to $300 billion in annual revenue.

Things have changed now. Without products, services are dispensable—and margin arbitrations will no longer hold countries ransom and fetch business here. It is this that this ₹1 trillion R&D fund hopes to help with, and now, a quick chat with Jyoti Sharma, the head of research, development and innovation at the Centre’s department of science and technology tells us that two fund managers are already appointed and operational. By the end of this fiscal, they’ll start identifying opportunities, and some time in 2026, the first checks will be signed.

This is exactly the kind of boost that the post-academia, pre-industry world needs, if you ask the few working tirelessly to help companies scale and bring their products to market. Some, like IISc Bengaluru’s Yogesh Pandit, and HCL co-founder Ajai Chowdhry, believe that this is a much-needed start to India’s R&D journey.

The question is, will this restart finally see us build what’s needed?

The side of electronics you don’t see often

This week, I also reported on a key rising challenge in India’s electronics manufacturing sector—the lack of cash flow and working capital.

You see, we keep talking about how India’s electronics exports are soaring, and assemblies have replaced 99.9% of mobile phone imports just over a decade ago. While that is great, this expansion has not led to the kind of material gain in patents and proprietary technology that China has achieved over the past two decades.

Now, India’s top tech makers are racing against time and incentives to acquire companies, as well as skills. By doing so, they’re now facing the perils that naysayers against pursuing a low-margin, high-volume electronics business had always warned about—despite a decade invested, still a capex challenge.

Brokerages, including the usually reliable JPMorgan, say the damage isn’t irreparable. But, there’s no denying that India’s electronics manufacturing industry today stands at an inflexion point—one where companies will have to prove their mettle by going up the tech value chain, or perish in the process.

A decade of UPI

I remember the day of demonetization quite vividly, simply because it has been discussed so many times. Over the next few days, what followed was a blitzkrieg on the Indian banking system, with most of the middle-class struggling to get some cash out of any ATM machine that would work.

This, as goes the story today, gave birth to India’s mainstream cashless economy. As UPI went mainstream, there is no question about what the technology has successfully achieved. Instead, the key question remains: what are the perils of this ecosystem, and can it be sustained forever?

This week, a Mint Long Story took a deep dive into a decade of India’s digital payments framework. Needless to say, this one’s quite the ride.

In other news: AI loan agent, creatives under fire

Shadma Shaikh at Mint wrote this week about how AI is rewriting the way loan defaults are handled. Many would wonder if this is true—after all, any individual who has ever defaulted in a loan repayment has faced what is colloquially quite common in the form of stories of indignation, and the pangs of strife. Ask the AI companies trying to win a slice of this business from banks, and they’ll tell you—compassion is the way ahead. Here’s Shadma’s piece. If you’ve faced this too, write in—we’re all ears to hear your experience as well.

Finally, the same $300-billion IT services industry we spoke about earlier in this week’s newsletter appears to draw a chunk of its business from media, entertainment, and digital marketing. The latter, as it stands, is right in the middle of a concentrated disruption rising out of the growth of AI-driven automation. Think Nano Banana, or Sora? Yeah, turns out it is automating quite a bit of this marketing industry. Here’s Jas Bardia, with why this is a massive disruption that could change the contours of thousands of jobs.

Transformer by Mint is a weekly newsletter that brings India’s most important and interesting technology updates under one umbrella. As the world transforms with every day of innovation, Transformer will keep a tab on the impact that technologies will make in each of our lives. Published every week, the newsletter brings some of India’s tech landscape’s most insightful coverages until date.