The fable lesson: Why India must play its AI market card
For the last three years, India followed a simple strategy on artificial intelligence. It did not try to build the world’s most powerful AI models. Instead, it focused on building smart applications using models made by others. India has a huge pool of tech talent, strong digital infrastructure, and a habit of adopting new technology quickly and cheaply. That is why it eventually become a place where raw AI capabilities turned into practical, valuable applications for farmers, small businesses, hospitals and everyday users. The AI models themselves, mostly built in American and Chinese labs, were treated like electricity or the internet. Something you simply plug into, without worrying too much about who built it.
This month, it was a comfortable assumption put to the test. Anthropic, a large U.S AI firm, was instructed by the U.S Government to block foreign users, such as Indians, from accessing its latest, most powerful model Fable. The message was loud and clear. Powerful AI is no longer just a product you buy. It is now treated as a strategic asset, something a Government can switch on or off in the name of national security.
The same week, a report revealed the depths to which AI has already seeped into the Indian work life. It found that 41 per cent of Indian workers use AI almost every day, higher than 26 per cent in China and 19 per cent in the United States. That is why the episode had the attention of many Indian founders and businesses.
None of this means India should panic, or shut its doors to the world. It’s merely a shift from the days of energy and semiconductors becoming a source of national strategy to AI. India needs to respond calmly, using the strengths it already has, rather than reacting out of fear.
The real lesson is about leverage, not going it alone
One can see the episode and easily deduce that India needs its own frontier AI model, which is to be trained entirely on Indian soil, so as no other country can be able to cut it off from the Indian frontier model. That instinct is understandable. But it should not be India’s main takeaway. Building a model that can compete with the world’s best requires far more computing power than India currently has access to. It also requires a domestic chip industry that simply doesn’t exist yet, and will take many years to develop. Trying to match the frontier on that timeline would pull money and attention away from where India’s real strength lies.
That strength is the size of India’s market. India is the largest market for AI users and developers globally, other than the United States and China. It is also the second largest contributor to AI projects on open platforms such as GitHub. No global AI company can afford to ignore a market this size. India’s internet users population of a billion plus, its huge developer community and its rapid growing digital economy are essential to their own investments for every big AI lab. This need runs both ways. It is this mutual need, more than any dream of total self-reliance, that gives a country like India real bargaining power.
Indian entrepreneurs have already made this point clearly. Saket Dandotia, founder of the Indian AI startup Onetab.ai, saw the recent restriction affect his own business directly. He stated that diversification buys time, but it does not buy independence. That single line sums up the real challenge well. Using AI models from different companies and countries is a smart, necessary step, and India is right to encourage it.
To its credit, India’s Government already seems to understand this difference. India has at the recent Global Meetings, made the argument for access to powerful AI models to be broad and equitable across countries. This is not a request for charity. It is about protecting the hospitals, banks, and public services that increasingly run on digital systems, and keeping them safe from cyber threats. Seek global consensus for a reliable, guaranteed connectivity as a common cause, incrementally create sufficient power within India so that no single limitation cripples it.
What building strength at home should really mean
India’s current approach here is already sensible, and worth building on rather than replacing. The India AI Mission already offers computing power to startups and researchers at around `65 an hour, a small fraction of the global rate of $2.5 to $3. This is the right instinct for a country still building its AI ecosystem. It focuses on giving more people access, rather than chasing prestige projects.
Indian homegrown language models are designed specifically for Indian languages and their usage, which differs from the role of a frontier model. They make AI usable for hundreds of millions of Indians who are far more comfortable in their own language than in English, no matter which company’s technology runs underneath. These models are not required to outperform the best AI in challenging reasoning tests. They only have to function effectively in agriculture, classrooms and welfare programmes; in many instances, they do effectively already.
The right way to think about this is not sovereignty versus dependence, but balanced, diversified strength. India should continue to create cost — effective and locally available AI tools that align with their unique strengths and expertise, particularly in areas like agriculture, regional language instruction, public administration, and financial inclusion. At the same time, it should keep widening its partnerships with multiple AI companies and countries, so that one country’s decision can never strand Indian businesses, hospitals, or Government systems. This is made apparent with a quick look at logistics. India never came to a halt for investing in highways as it also built railways and waterways. It created all three, for resilience. AI policy should follow the same logic, mixing open-source tools, partnerships with several global AI labs, and strong homegrown models, rather than betting everything on just one path.
India’s growing voice on the world stage
India is not entering this conversation from a position of weakness. Recently it became the first South country to host a big global AI summit, making it an obvious host for the kind of conversations that are needed. It is bringing together nations that share its interest in fair, broad access to powerful AI, instead of a world where just two or three countries control the switch for everyone else. This role alone enables India to have an impact on how AI is used, making it accessible to a range of languages and keeping it safe, not just following instructions that have been set elsewhere.
This is also why India’s new AI governance framework matters beyond its borders. Its approach, built on clear principles and a focus on innovation, sends a strong signal to global partners. It informs them that India is a serious, stable market for them to establish long term partnerships — rather than a country that closes its doors in the wake of one challenging incident.
What India should do next
Three practical steps can strengthen India’s position, without chasing an unrealistic race to match the global frontier.
First, India should open up its formal partnerships of AI in a manner that no Indian business, research institution or government system becomes entirely reliant on one firm or one country’s export policies. This is simply good risk management, the same kind India already applies to energy supply contracts.
Second, India must continue to invest in agricultural, health, regional-language education and financial-inclusion compute subsidies and develop local AI models, where it has an inherent advantage, and also in other areas. This matters more than trying to compete everywhere at once with limited resources.
Third, India should keep using its growing voice on the world stage, built through this year’s global AI summit and its presence at forums like the G7, to push for clear, lasting rules around fair access to powerful AI.
None of this means India should treat the recent restriction as a crisis. It is better understood as an early preview of how AI politics will work over the next decade. Access to powerful AI will sometimes be restricted, and market size will increasingly decide who gets a fair seat at the table when those decisions are made. The countries that invest wisely and are smartly leveraging the market overseas, rather than depending solely on others or attempting to do it on their own, will be standing on top of the pile. With its scale, its talent, and its growing voice in exactly these conversations, India is better placed than most countries to be one of them.
The writer is Assistant Professor, School of Business Management, Narsee Monjee Institute of Management Studies, Mumbai; Views presented are personal.
