India's AI moment: Hype, investment & reality

In February this year, India hosted the AI Impact Summit, the first of its kind, signalling a clear intent to lead the AI narrative rather than simply be part of the conversation. Now, a new report by an AI-native VC, SenseAI, reinforces that momentum. It says global AI investment reached $800 billion in 2025, with venture capital funding nearly doubling to $226 billion. India, meanwhile, is increasingly being seen as a hub for AI applications, a place where technology is being adopted at scale, adapted to local use cases, and used to build a new generation of companies.

The report challenges the conventional view of India as a follower in the global AI race. Instead, it highlights how India is emerging as a key driver of the AI application layer, the point where commercial value is ultimately captured. The report states that 75% of Indian AI startups are building at the application layer and nearly 80% of funding is flowing into applications. Meanwhile, a majority of startups are reaching revenue stages early.

"That amount of money is the largest we've seen flow into any industry when it's born. AI is not one thing; it's not just ChatGPT. For example, if you think of electricity, a lot of plants generate that electricity but in this context, application is that electrical appliance like a toaster you use at home. That is where AI becomes useful to you and me," said Rahul Agarwalla, Managing Partner, SenseAI Ventures, during a panel discussion at WION on India's AI Moment.

Speaking about the broader implications, Juhi Bhatnagar, a key advisor to the Indian AI Research Organisation and Founder, Forj, said, "Nations are not very different from businesses. For instance, in the last decade, China won on manufacturing, Singapore won on speed of decision-making, India won on services and the U.S. won on innovation. But this AI boom has told us, if you're not innovative, you can't have a competitive edge as a country. Thus, you have to invest more in R&D, and from going from papers to patents and from patents to products; that's the journey as a country that we have to traverse."

ALSO READ: With Hormuz disrupted, what are the alternative routes for Middle East oil and gas exports—and are they enough?

Indian AI Research Organisation works on advancing sovereign AI capabilities, policy research and ecosystem development in India.

AI applications now account for approximately 75% of the ecosystem, with Enterprise SaaS emerging as the largest category. The segment grew from 14.1% in 2024 to 25.5% in 2025, reflecting rapid adoption within enterprise workflows. Additionally, 60% of startups are already post-revenue at early stages, driven by faster adoption and monetisation cycles of AI-native applications.

But how is this shift playing out in reality? What is working and what isn't?

"AI is here to stay. And in the last few years, it has moved from experimentation to execution in most industries. I think we need to look at it from different dimensions. There is traditional AI, which was largely confined to certain enterprises. And then what we are looking at and experiencing right now is agentic AI, the transformation where autonomous decision-making comes into the picture. But from an end-user and enterprise perspective, is it really solving the problem? Definitely, it is solving the problem in pieces and there are tools available which can solve your business problems. But when you look at it holistically, that's where the end-to-end, the workflow and the larger picture comes into play," said Achin Sharma, Head of Technology and Cybersecurity at MOVIN India, during the panel discussion.

ALSO READ: India-bound ship among two vessels attacked in Strait of Hormuz, seized by Iran's IRGC

The SenseAI report also states that Enterprise AI contract sizes have grown sharply, from $39,000 to $530,000 in just two years, signalling growing enterprise confidence in AI deployments.

As investment accelerates and deployment expands, another critical question is beginning to take centre stage - regulation. With AI systems increasingly influencing businesses, economies and everyday decision-making, the conversation is no longer just about innovation, but also about accountability.

During the panel discussion, the issue of governance & digital sovereignty also came up, particularly around who should regulate AI and how. "The realization that has come is that if our people use the data, if a billion plus Indians are using AI products, all that data is today leaving the country if they're using foreign products. So, should that data stay here? Should our companies, our government get the benefit of that data, learn from that data? Of course, yes. So, that is one clear place where you require regulation," Agarwalla explained.

Achin added, "We have to see how things will evolve once the Digital Personal Data Protection Act gets fully enforced, which is the Indian data law. Because all this data is being, in a way, exported to other countries and somewhere I have read a long time back that if the service is free, you are the product."

ALSO READ: US Stockpiles running dry? Heavy use in Iran war pushes THAAD, Patriot and Tomahawk reserves to the brink

India is one of the largest user bases for AI globally, particularly when it comes to tools like GPT. With millions of users interacting with AI systems daily, this also means vast amounts of data are being generated and processed. Panelists noted that as AI adoption grows, questions around how this data is collected, stored and used become increasingly important.

Juhi noted that while India is one of the largest AI user bases, generating data and even building applications locally, much of the revenue and tax benefits are captured overseas, particularly in the United States, meaning India contributes the data and insights while value is created elsewhere.

As India's AI ecosystem continues to expand, the focus is now shifting from adoption to ownership of data, innovation and economic value. How India navigates this next phase could reinforce its position as a global AI leader, particularly for emerging economies and the Global South.