According to the Economic Survey, only 2% of Indian companies are using AI training data, compared to 40% in the US

Lack of AI Training Data Startups Holds Back India’s AI Potential: Economic Survey

India has yet to see the emergence of startups at scale that focus on curating and organising training data for artificial intelligence models, limiting the country’s ability to fully leverage its vast and diverse data resources, the Economic Survey 2025–26 said.

According to the Survey, India accounts for just 2% of global startups working on AI training data, compared with 40% in the United States, 21% in the European Union, and 9% in the United Kingdom. China accounts for about 5%, the report said, citing World Bank data.

“India holds considerable potential advantage in terms of domestic data sources, but this asset remains underutilised,” the Survey noted.

A different AI path for India

The report said global AI development has diverged along two broad paths. Western technology leaders have focused on building large, frontier AI models, backed by massive capital investment and advanced computing infrastructure. In contrast, many other countries have adopted a decentralised, application-driven approach.

Given its constraints in access to high-end computing infrastructure and funding, the Survey argued that India should prioritise the latter strategy, rather than competing directly in building expensive foundational models.

It recommended a bottom-up approach to AI development, centred on application-specific solutions tailored to India’s needs. Smaller, targeted AI models focused on sectors such as healthcare, agriculture, finance, education, and governance would be more practical and impactful, the report said.

“These models are more efficient, easier to fine-tune, and better suited to India’s existing infrastructure,” it added.

Scaling innovation and moving up the value chain

The Survey said such an approach would allow startups, research institutions, public bodies, and domain-specific companies to play a larger role in AI innovation, lowering entry barriers and accelerating adoption across sectors.

It also called for greater participation from Indian companies to help scale successful AI applications and absorb early-stage risks. Developing sector-specific AI solutions could help India’s IT industry move up the value chain, transitioning from a back-office services provider to an “AI front office,” the report said.

Overall, the Survey concluded that a bottom-up, open, and application-focused AI strategy offers India a clear pathway to building a globally competitive AI ecosystem.