CCI Study Reveals Insights into India's AI Startup Ecosystem and Regulatory Landscape

CCI study finds 67% of Indian AI startups focused on building AI applications

A recent survey by the Competition Commission of India (CCI) has found that nearly 67 per cent of Indian AI (Artificial intelligence) startups are primarily engaged in developing AI-based applications, with the majority relying on open-source technologies. New Delhi [India], October 8 (ANI): A recent survey by the Competition Commission of India (CCI) has found that nearly 67% of Indian AI (Artificial Intelligence) startups are primarily engaged in developing AI-based applications, with the majority relying on open-source technologies. The study highlighted how artificial intelligence is rapidly reshaping India's business landscape, driving efficiency and innovation across sectors. According to the findings, 76% of startups build their AI solutions using open-source platforms due to their accessibility and cost advantages. It stated "the core area of work for almost 67% of respondents in AI startups in India lies in the layer of building AI applications. The adoption of AI technologies in India is rapidly accelerating across various user sectors. The integration of AI across industries is reshaping market structures and business strategies". Around 88% of the respondents use machine learning (ML) as the foundation for their AI solutions, while 66% employ generative AI models such as large language models (LLMs). The use of natural language processing (NLP) stands at 78%, and 27% of startups are working in computer vision (CV). The CCI noted that global players such as Google, Microsoft, Meta, Amazon and OpenAI are major contributors to open-source technologies and algorithms used for model building. The adoption of AI is also spreading quickly across industries, transforming how companies operate. The study found that AI is being widely used in banking and financial services, healthcare, retail, e-commerce, logistics, and marketing for purposes such as dynamic pricing, personalised recommendations, demand forecasting, and automated decision-making. About 90% of the businesses surveyed said they use AI to monitor customer behaviour, while 27% use it to track supply chain efficiency. Nearly 69% use AI for demand forecasting, 24% for pricing trend analysis, and 21% for predicting inventory needs. The survey report also highlighted that AI helps businesses improve productivity, reduce costs, and gain a competitive edge by offering better and more personalised services. However, it also warned that companies failing to adopt AI risk losing competitiveness in an increasingly AI-driven market. Reacting to the findings of the study, Shivanghi Sukumar, Partner, Axiom 5 law chambers, said, "The CCI's study adopts a thoughtful and forward-looking approach that aligns with the objectives of the IndiaAI Mission. The study highlights areas that could shape competition dynamics in the future, including emerging risks of algorithmic collusion, opacity in AI decision-making, and unequal access to data and compute. By flagging these issues early, the CCI acknowledges that AI could gradually reshape market structures". To ensure fair competition and safeguard consumer interests, the CCI said it will continue to focus on promoting a culture of competition compliance and preventing AI-driven anti-competitive practices. The commission aims to support the development of a healthy and innovative AI ecosystem in India.

How Startups, Platforms Want the CCI to Regulate AI Economy

The Competition Commission of India (CCI) has gathered perspectives from startups, user industries, AI platforms, and legal experts in its Market Study on Artificial Intelligence and Competition (2025). Most stakeholders urged the regulator to create a framework that encourages innovation while addressing market concentration, algorithmic bias, and data control by large technology firms. The study shows that India's AI sector is expanding faster than its regulatory capacity. Startups want easier access to data and less dependence on dominant players. Platform companies want proportionate, risk-based regulation, while legal experts want enforceable rules and incentives for responsible innovation. Together, their views reflect an AI economy that is struggling to balance competition, innovation and consumer protection. What Startups Told CCI The Need for Data Access and Fair Competition AI startups told the CCI that India needs "a balanced regulatory approach" that supports innovation while ensuring fair competition. They raised concerns that large technology firms control access to essential inputs such as data, compute infrastructure, and skilled talent. According to the report, "data accessibility emerged as a critical issue", and respondents suggested that the government "make anonymised data publicly available and introduce an AI governance policy in India, learning from global best practices". Moreover, several startups said government-created data pools could democratise access and reduce reliance on global technology providers. They argued that shared, anonymised datasets would allow smaller firms to train AI models responsibly while protecting user privacy. The report also notes that many startups depend on upstream vendors such as AWS and Microsoft Azure for cloud and compute services. These vendors classify partners as "Gold Vendors" or "Platinum Vendors" based on credit and sales volume. Respondents said such partnerships "may raise important considerations for competition policy, particularly regarding barriers to entry, long-term exclusivity, and concentration of innovation capabilities among a few dominant players". Regulatory and Compliance Challenges Startups said these arrangements often lock smaller companies into a particular ecosystem and make switching providers costly. They added that long-term credit-linked contracts can make startups financially dependent on large vendors, limiting their ability to negotiate fair terms. Compliance requirements for serving global clients were another major concern. Startups said they must often adopt the legal frameworks of their clients' jurisdictions or set up subsidiaries abroad to meet regional governance rules. This raises operational costs and adds complexity. To address these issues, startups proposed the creation of an Indian AI regulator that defines "performance benchmarks, third-party validation protocols, and regulatory approvals for AI-based products". The report notes that such a body would "ensure legal credibility and protect against liability risks from AI misperformance". Furthermore, startups said India should align its data protection framework with global standards and promote privacy-preserving AI techniques. They also cited ISO 42001 certification for AI management systems as an emerging best practice that could guide domestic governance models. What AI Platforms Said AI platform companies told the CCI that India should adopt "a risk-based and proportionate regulatory framework" that focuses on specific AI applications instead of imposing broad, one-size-fits-all restrictions. They said regulation must prevent concentration of power without stifling startups and smaller innovators. The report records that most cloud and model-access agreements in India are non-exclusive, allowing customers to switch providers. Respondents said such flexibility demonstrates "the competitive options available in the market". However, they acknowledged that "exclusive cloud supply or distribution agreements that create dependence on a particular platform" can lead to concentration of market power. AI platforms also discussed the role of mergers and minority investments. They said small, non-controlling stakes generally support innovation by bringing capital and expertise, while large financial or restrictive stakes could suppress competition. The study notes that "minority investments with investor protection rights are generally pro-competitive" when structured to preserve independence in input procurement, technology development, and commercialisation. At the same time, the CCI warns that "investments that appear to be minority stakes but confer substantial influence" may still require scrutiny under merger control provisions. The report highlights that "exclusive rights to an AI developer's intellectual property" or long-term cloud commitments could act as indicators of concentration. Moreover, platform firms said India's existing competition framework is "well equipped to balance the need for competition with the need to encourage innovation" through careful case-by-case analysis. They added that the key challenge now is for regulators to build technical expertise to understand how algorithms behave, interact, and influence market outcomes. What User Industries Told CCI User industries such as digital marketing, e-commerce, logistics, and retail said AI adoption has increased efficiency, improved product quality, and enabled better customer targeting. However, they cautioned that these gains come with higher dependence on large vendors controlling infrastructure and analytics systems. Industry participants told the CCI that "collaborations between large organisations should be monitored to prevent anti-competitive practices". They noted that vendor agreements can be horizontal, vertical, or complementary, with credit contracts often following standard terms while customer agreements are more customised. Such arrangements, they said, can create long-term dependencies that restrict smaller firms' ability to compete. To improve access for startups, respondents suggested that the government "create sector-representative data pools" that reflect industry-specific needs. These data pools would allow new entrants to train AI systems effectively without relying on dominant platforms. Additionally, sustainability emerged as a recurring concern. Participants called for responsible AI adoption that reduces environmental impact while improving consumer outcomes. They urged the government to promote AI applications that deliver "better product quality, consumer benefits, and reduced carbon footprints". What Legal Experts Told CCI Calls for a Strong Legal Framework Legal experts told the CCI that India urgently needs "a comprehensive and enforceable legal framework" for AI that ensures responsible development and safeguards both competition and consumer welfare. They said the country's policy direction must provide incentives for startups while maintaining strict oversight of dominant platforms. Experts cited international examples as potential models. The report says "the introduction of regulatory sandboxes by the European Union (EU) and the UK was seen as a step forward", referring to initiatives like the Lawtech UK Sandbox, which allows startups to collaborate directly with regulators, reduce compliance costs, and test products before enforcement. Respondents also mentioned that France and Germany "provided regulatory exemptions to homegrown AI developers, such as Mistral AI, to level the playing field". Data, Synthetic Data, and Startup Support Legal practitioners also raised several risks that require immediate attention. They said AI can enable "companies to access personal information and engage in discriminatory practices, limiting consumer choices". They warned that "concentration of data within a few large firms limits the access of smaller developers to valuable resources". To counter this, they suggested mandating the disclosure of public and anonymised data to "democratise access and level the playing field". On synthetic data, experts said the government should regulate its generation "to avoid fake data and content", while encouraging big technology firms to "generate more synthetic data in the public domain so that startups have a fair chance to compete". They emphasised that India must balance data protection laws with mechanisms for "accessible and legally compliant data sharing while maintaining confidentiality and accountability". Additionally, experts called for an AI startup policy with targeted financial support and innovation incentives. They said such a policy could create a more equitable ecosystem and prevent excessive dependence on foreign capital or technology. The report concludes that respondents consistently supported "balanced regulations that foster growth and innovation in the AI ecosystem while addressing ethical, competitive and consumer protection concerns". Why This Matters The CCI's findings come at a time when India's digital regulation remains uncertain. The government has paused the ex-ante provisions of the Digital Competition Bill, saying it wants to protect startups and small enterprises. However, several Indian companies, such as Bharat Matrimony, TrulyMadly, and MagicBricks, have warned that the delay helps dominant global platforms and leaves smaller firms without safeguards. Their accounts show the same risks the CCI identifies in its AI study. High commissions, restrictive billing systems, and arbitrary app removals demonstrate how concentrated platform power can limit competition and slow innovation. These examples mirror the regulator's warning that opaque algorithms and control over key digital infrastructure can distort markets even without direct coordination. Both the Digital Competition Bill debate and the AI market study reveal how India's regulatory approach still depends on reacting after harm occurs. The challenge is that technologies shaping markets evolve far more quickly than enforcement does. Without timely action, dominance can deepen and accountability can weaken. In the end, the CCI's study is not just about algorithms or pricing systems. It raises a broader question about whether India can regulate fast enough to preserve fair competition before concentrated power becomes impossible to undo.