Economic Survey calls for data sovereignty as India trails in AI training startups

The latest Economic Survey for 2025–26 has unveiled a pressing issue within India's thriving startup landscape: a notable deficiency in companies dedicated to training data and essential infrastructure for artificial intelligence. Despite India being a significant player in global AI research and boasting a well-educated workforce, it only houses about 2% of startups involved in training data curation. This stands in stark contrast to the United States, where the figure is 40%, and the European Union at 21%. The Survey emphasizes the untapped potential of India's vast and diverse datasets in sectors such as health, agriculture, finance, and public administration. It warns that without enhancing local capabilities in data management and model development, much of the economic value generated from these datasets could end up benefiting foreign entities. The Survey highlighted the urgency of refining domestic data curation processes, particularly as the current supply of training data is expected to diminish soon, with models becoming ineffective when solely reliant on synthetic data. Moreover, the report points out the infrastructure limitations that exacerbate these challenges. India accounts for only 3% of the world's data centers, significantly lagging behind wealthier nations, which hampers access to advanced computational resources for emerging companies. In addition, a shortage of GPUs and high-bandwidth memory chips is causing delays and escalating project costs. To address these issues, the Survey proposes a governance framework aimed at ensuring strategic control over Indian data while still allowing companies to engage with global AI ecosystems. It stipulates that organizations processing Indian personal data at scale, especially for significant applications like model training, must guarantee the data remains auditable and accessible, subject to oversight by Indian authorities. Instead of mandating domestic processing, the focus will be on establishing technical and contractual arrangements that enable regulators to track data origins and monitor its usage, including taking necessary corrective actions. The framework will build upon the Digital Personal Data Protection (DPDP) Act of 2023, advocating for a more nuanced categorization of data to ensure regulations are effectively tailored to its sensitivity and economic implications. A crucial component of this approach is the requirement for qualifying firms to keep mirrored copies of relevant datasets and derived materials within India. This strategy aims to maintain regulatory oversight even for offshore processing, avoiding the rigidities and costs associated with mandatory domestic operations. The Economic Survey positions AI not just as a commercial venture but as a critical strategic priority for India's future. It cautions that heavy reliance on foreign AI platforms could limit India's options in light of evolving global power dynamics shaped by export controls and technology regulations. In conclusion, the Survey underlines the importance of viewing AI as a strategic asset, with profound implications for India's infrastructure, workforce, foreign relations, and cultural landscape.