India’s Chief Economic Advisor Calls for More Private R&D Investments as Govt Funds 50%

Ahead of the Union Budget 2025, the chief economic advisor to the Indian government, V Anantha Nageswaran, discussed the impact of artificial intelligence (AI) on employment and labour in the latest economic survey. 

He highlighted that raising wages and salary growth for workers is not just a moral imperative but also a driver of aggregate demand for businesses in the medium run. “It is enlightened self-interest rather than being seen only from a moral prism,” he stated.

He pointed to AI as a clear example of the evolving balance between capital and labour, referring to a special essay on the topic in Chapter 13 of the Economic Survey 2024-25. 

“Deployment of artificial intelligence presents both opportunities and challenges. Past technology revolutions, in general, sometimes make us feel that technology eventually generates more jobs than it displaces. That is true, but the key word is ‘eventually’,” he emphasised.

Nageswaran underscored the importance of addressing the transition period before AI-induced job displacement leads to new opportunities. 

“What happens between ‘now’ and ‘eventually’ is critical, and that is where we need to create supporting institutions, enabling institutions to train workers and prepare them. Academic curriculums have to change, workplace practices have to evolve,” he said. 

He acknowledged that technological transitions in history, particularly during the previous three industrial revolutions in the Western world, had not been painless. “We need to learn from them, and that is what this chapter covers.”

Nageswaran also stressed that businesses must weigh AI’s benefits against its long-term social costs. “The private sector needs to consider the subterranean social costs, which may surface over time and eventually affect the environment necessary for running businesses smoothly. The chapter argues [that] for cash flow deployment optimised over a long horizon, this will augment labour and deliver broad-based social benefits.”

In a lighter vein, he said, “One of the considerations – when we wrote this chapter – was whether it would become outdated by the time it goes to print, given the fast changes happening in the artificial intelligence space.” 

However, he reassured that the discussion focuses not on technological advancements themselves but on AI’s broader economic and labour implications.

He further pointed out the relatively low R&D spending by India’s private sector, noting that compared to other countries, 50% of India’s R&D expenditure comes from the government, 41% from business enterprises, and only 9% from higher education institutions. 

“This is one area where the private sector must step up. Despite available incentives, private sector R&D in India remains both limited and sectorally concentrated.”

‘From Make in India, We Have Moved to Make for the World’

President Droupadi Murmu, addressing the joint session of Parliament ahead of the Union Budget session, emphasised the government’s commitment to making India a global leader in innovation. “Our aim is to make India a global innovation powerhouse. In the area of artificial intelligence, IndiaAI Mission has been started,” she stated.

Highlighting India’s growing influence in digital technology, she said, “Our country is emerging as a major global player in digital technology.”

‘From ‘Make in India’, we have moved to ‘Make for the World’,’ President Murmi added while talking about the defence sector and innovations.

The IndiaAI Mission, launched to strengthen the nation’s role in artificial intelligence, was also discussed by IT minister Ashwini Vaishnaw in a press conference. 

He recently confirmed that India’s LLM would be ready within 10 months. The electronics and information technology ministry, through its IndiaAI Mission, has also called for proposals to create AI models that are tailored to Indian needs while meeting global standards.

This proposal comes after Vaishnaw said India is set to develop its own generative AI model, aiming to rival global platforms like ChatGPT and DeepSeek. “Very soon, we will have our own LLMs,” Vaishnaw added.

Comparing India’s AI infrastructure to global benchmarks, Vaishnaw noted, “DeepSeek AI was trained on 2,000 GPUs, ChatGPT was trained on 25,000 GPUs, and we now have 15,000 high-end GPUs available. India now has a robust compute facility that will support our AI ambitions.”

For the Union Budget 2024-25, the Indian government has underscored its commitment to AI by approving the comprehensive IndiaAI Mission. A substantial financial outlay of over ₹10,000 crore was earmarked for the mission over five years, of which ₹551 crore has already been allotted. 

Speculations and discussions are rife about who stands to benefit and what allocations will be made. While finance is obviously the big picture, considering how the IndiaAI Mission found its place in the previous Budget, AI is likely to take centre stage in the upcoming session tomorrow.