India's AI Ecosystem Faces Talent Shortages and Data Hurdles Despite Rapid Growth

Talent, data hurdles primary barriers for India's AI ecosystem: Report

According to the report, which surveyed 308 stakeholders, including startups, business users, and consumers, 47.2% of respondents identified talent availability as a significant barrier to competitiveness - ranking it jointly as the top challenge alongside customer adoption. Shortage of skilled talent and a lack of data standardisation are the primary constraints facing India's artificial intelligence (AI) ecosystem, rather than market concentration or exclusionary conduct by big tech firms, a report by policy think tank The Dialogue said on Wednesday. The study, titled 'Competition, Innovation, and Market Structure in India's AI Ecosystem', suggests that while the sector is in a rapid "developmental and expansionary phase", structural deficits in the talent pipeline and data usability are emerging as major concerns. According to the report, which surveyed 308 stakeholders, including startups, business users, and consumers, 47.2% of respondents identified talent availability as a significant barrier to competitiveness -- ranking it jointly as the top challenge alongside customer adoption. "Talent availability is emerging as a critical constraint on AI competitiveness. Beyond a large technology workforce, AI development requires specialised skills to build, train, deploy and scale AI systems," Bhoomika Agarwal, Senior Programme Manager at The Dialogue, said. The findings further revealed that data usability is a bigger hurdle than scarcity. Approximately 63.2% of AI developers cited a lack of data standardisation as their most significant challenge, far outstripping concerns over copyright (44%) or data scarcity (42%). Notably, only 15% of respondents felt that government-held datasets were readily accessible. The study also highlighted the deeply embedded nature of open-source AI in India. A striking 96.2% of AI startups and developers respondents reported some reliance on open-source models and tools, with 62.3% reporting 'high' reliance.

Mapping India's AI Boom: Study Highlights Competition, Innovation, and Adoption

74.5% of AI developers see sufficient choice among compute providers, while 96.2% rely on open-source AI, underscoring the case for proportionate, evidence-based AI regulation India's AI ecosystem is expanding rapidly, with evidence of provider choice, widespread open-source use and growing value for businesses and consumers, as per new study, "Competition, Innovation, and Market Structure in India's AI Ecosystem: An Empirical Assessment," by The Dialogue, a public policy think-tank, examining competition, market dynamics and adoption across India's AI value chain. Drawing on the experiences of AI startups and developers, business users and consumers, the study portrays a dynamic and increasingly competitive ecosystem. It also identifies areas requiring continued attention, including compute affordability for some users, data standardisation and public-data access, talent availability, pricing transparency, privacy, and switching and integration frictions. The report recommends that India build on its progress by continuing to invest in enabling infrastructure and skills, supporting open and interoperable ecosystems, strengthening institutional capacity and regulatory coordination, and monitoring market developments as the ecosystem matures Key findings from the study include: * 85% of AI developers rely on public cloud: 5% see sufficient choice among compute providers, suggesting provider access is not yet a widespread competition constraint. * Over 79% see open-source models as at least a partial substitute for proprietary models: 2% of AI developers rely on open-source tools, with 62.2% reporting high reliance, signalling a strong competitive alternative that can lower barriers for startups and downstream developers. * 2% of AI developers cite data standardisation as their biggest data challenge: With only 15% finding government-held datasets readily accessible, the bigger hurdle is making data usable and accessible rather than simply increasing its availability. * 2% of AI developers identify talent availability as a major barrier to competitiveness, underscoring the need to strengthen AI skills, workforce development and talent mobility to support the sector's growth. * 85% of businesses report a positive impact from AI, with 61% citing better decision-making and 55% faster delivery: 67% say AI costs are reasonable relative to the benefits, signalling that AI adoption is already translating into tangible business value. * 79% of consumers say AI has improved their experience and 74% agree that integrating AI into digital services has improved their overall user experience : 62% find switching between services easy, indicating meaningful consumer choice and mobility, though concerns around data use and ecosystem dependence remain. Speaking on this, Kazim Rizvi, Founding Director, The Dialogue, said, "India's AI ecosystem is showing encouraging signs of competition, innovation and adoption. The experiences captured in this study suggest that access, choice and the value generated by AI are expanding, even as important questions around data, talent, transparency and consumer trust require sustained attention. The evidence in this study is important because it helps distinguish between potential competition risks and demonstrated market harm. India should continue creating the conditions for competition, experimentation and innovation to flourish and build on this momentum through an evidence-led approach that supports investment and innovation, preserves competitive opportunities and protects consumer interests as the market evolves." Bhoomika Agarwal, Senior Programme Manager The Dialogue, also said, "The study captures an ecosystem that has made considerable progress while also identifying areas that require continued attention. As AI markets evolve, policy must remain responsive to both emerging opportunities and potential concerns. An evidence-based and proportionate approach can support investment and innovation. Further, addressing concerns will require sustained collaboration between government, industry, academia and civil society, supported by regular engagement and continued assessment of market developments." The report concludes that India's immediate policy priority should be to strengthen the foundations of competition - access to compute, data, talent and interoperable technologies while maintaining close scrutiny of evolving market conduct. Such an approach can help India preserve the dynamism of its AI ecosystem while ensuring that emerging competitive risks are addressed through evidence-based and proportionate intervention.