Can India be a Global Power Without Recasting the State?

In the nineteenth century, steel and railroads defined global power. In the twentieth, it was computing and the internet. In the twenty-first, it will be artificial intelligence (AI). Yet India, the world’s fifth-largest economy, still hasn’t decided what role its state should play in this technological revolution.

Most commentary on the Indian state today focuses on its authoritarian drift – power concentrated in the executive, institutions bent to political will, prejudice against minorities. But alongside these civil and political questions a question that is just as important is: does the Indian government have a clear plan for navigating the country through a economic and technological transformation unleashed by the AI? This question could determine whether India emerges as a significant global power or continues to be a peripheral participant in an age where AI is reshaping global power structures.

The high stakes

The AI potential is immense. A 2023 McKinsey Global Institute study estimated that generative AI alone could add more than $4 trillion annually to the global economy – roughly the size of Germany’s Gross Domestic Product (GDP). This would be on top of the $11 trillion that non-generative AI and automation could contribute.

For India, this AI revolution comes at a critical juncture. Despite it being the fastest growing large economy in the world, India's unemployment rate – especially among the youth – is high. All-India unemployment rate is at around 5%, but joblessness in the 15-29 years age bracket is nearly three times. Moreover, nearly 60% of Indian workers are employed in low-productivity services. According to Morgan Stanley, India needs to grow at the rate of 12.2% to address its humongous underemployment challenge.

Generative AI if not adopted widely alongside national level reskilling drive, will further accentuate the unemployment problem. India need to not only achieve a double digit growth rate but also simultaneously create jobs at an unprecedented scale.  The writing is on the wall – without AI-driven economic growth acceleration, India's demographic dividend will turn into a demographic liability

The decisiveness of US and China, and India’s drift

Around the world, leading powers have made their choices.

The United States has positioned itself as a strategic enabler. Washington has poured billions of dollars into basic research, semiconductors, and computing infrastructure laying the foundation for private firms to attain technological breakthroughs. The CHIPS and Science Act of 2022 alone earmarked $52 billion for semiconductor manufacturing and R&D. New initiatives like the National

AI Research Resource aim to make compute and data available to universities and startups.

China has chosen the role of commanding architect, aligning capital, regulation, and industry toward AI dominance. Its 2017 AI strategy declared that by 2030, the country would be the world’s leader in AI across the economy, military, and society. Since then, Beijing has invested billions in semiconductor fabs, supercomputers, robotics, and AI applications, aligning private enterprise with state missions.

India, by contrast, has yet to decide. It lacks China’s centralised discipline and America’s institutional ecosystem. Instead, it drifts – sometimes coercive where it should be enabling, and enabling where it should be strategic.

This tardiness is not new. At the turn of this decade, Dr. Manmohan Singh's National Manufacturing Plan and Prime Minister Narendra Modi's Make in India promised to raise the manufacturing sector's share of GDP from 16% to 25% by 2022, creating 100 million jobs in the process. It was too little too late. China and other east Asian economies had already stolen the march in the world of manufacturing before India woke up to its necessity. The dream of a manufacturing miracle creating large scale employment never materialized. Manufacturing is still stuck at 16-17% of GDP, and jobs in the sector have instead gone down.

Now, India risks missing something far more consequential: the AI revolution.

The real problem

The challenge is not just lack of resources. It is lack of clarity. The Indian state has never been sure whether it wants to be an owner, a regulator, a patron, or a competitor. Too often it tries to be all at once. The result is an unstable and coercive environment where entrepreneurs face arbitrary interventions or worse cronyism and punitive action at the hands of state agencies.

“Minimum Government, Maximum Governance” was supposed to fix this. Instead, the state has grown more intrusive and authoritarian. Agencies like the Enforcement Directorate wield draconian powers against businesses. Decision-making has become centralised and a sense of fear and dread prevails in the business community. The investment numbers, not surprisingly, are not looking good.

This year, private investment as a percentage of GDP fell to 33%, the lowest level in ten years. In May 2025, net foreign direct investment (FDI) inflows were $35 million. This was 98% less than the $2.2 billion that came in May 2024 and 99% less than the $3.9 billion that came in April 2025.

What India must do

India has launched the IndiaAI Mission, earmarked more than ₹10,000 crore for AI infrastructure, and pushed national strategies on skills and digital adoption. Pilots in agriculture, health care, and governance have shown promise, while private IT firms are training their workforce. But these efforts are too modest and fragmented. The AI-enabling infrastructure – like compute clusters, semiconductor ecosystems, and research hubs – is lacking. To truly meet the domestic and international challenges the AI age poses, India needs to act with urgency.

First, infrastructure for innovation

India is scaling up data centres, but there is a big gap: it generates 20% of the world's data but only has 3% of its data-center capacity. The government launched the India Semiconductor Mission (Rs. 76,000 crore) in 2021 to bring in chipmakers and build fabs. Four years on, not a single advanced fab is up and running. Compute clusters, public GPU clouds, and semiconductor fabs (to manufacture chips that power the AI revolution) must be scaled dramatically and anchored in a coherent national AI roadmap.

 Second, workforce preparation

Skilling programmes like Skill India and private reskilling programmes, are mostly for training in general job skills like hospitality, construction, textiles, and basic IT literacy. AI reskilling drives by big IT companies is restricted to their highly skilled work force, that too concentrated in urban tech hubs. India needs a national AI plan for its workforce that integrates AI in higher and secondary education, vocational training, and reskilling for everyone.

Third, focus on diffusion, not just breakthroughs

India’s National Strategy for Artificial Intelligence (by NITI Aayog) lists healthcare, agriculture, and education among the priority sectors (alongside others such as smart cities and mobility) for deployment of AI for “social good. However, the majority of initiatives are modest, experimental, and restricted. Small and medium-sized enterprises (SMEs), account for 30% of India's GDP, employing 110 million people. But mostly they are characterised by low productivity, minimal R&D, limited tech capacity, and thin margins.

To push AI adoption beyond big corporates and urban centres, India needs to lower AI adoption barriers by offering targeted subsidies, affordable "AI-as-a-service" platforms, and incentives that help SMEs adopt AI at a mass scale and use it in their daily operations.

Fourth, building global alliances

India is involved in AI talks in the Quad, the G20, and in bilateral partnerships like the US-India TRUST initiative. But it needs to go from mere participation to taking the lead: building and running research and computing hubs, setting global AI standards, and ensuing open access without relying on foreign companies.

Consumer or player in AI revolution?

In the 21st century, who leads AI will decide not only how well its national economy does, but also how strong its military is and how much geopolitical power it has in the world. India's size, talent pool, and entrepreneurial spirit, demands it to be a major AI player. But only if the state recasts it role which is predictable, restrained, and strategic.

For the government to cling to its mai-baap instincts is to condemn India to being the garage of global technology – assembling others’ tools rather than inventing its own. It is not enough for India to be a consumer of others’ breakthroughs. If the state plays its role wisely, India can define how humanity’s most powerful technology is harnessed – from shaping innovation to writing the global rules of the AI age. That is what a true great power should do.

Ashish Khetan is a lawyer and specialises in international law.

The Wire is now on WhatsApp. Follow our channel for sharp analysis and opinions on the latest developments.