Can it Play a Leadership Role in the Global South?
The State of AI Development and its Financing in India
While India ranks in the global top five on Stanford University’s AI Vibrancy Index which assesses countries on metrics such as patents, funding and policy and research, experts agree that India is many years behind the two global leaders, China and the United States of America (US). Most notably, India lacks its own hardware and compute infrastructure, and it’s national AI Mission has come a few decades after China first prioritized its continuing national focus on AI.
Unlike China, India does not have good examples of government led and financed IT services or infrastructure for businesses or startups, though it seeks to facilitate and enable this with the India AI Mission, and it has built or backed major “digital public infrastructure” (DPI) and its platforms such as Aadhaar, the Unified Payments Interface (UPI) and the Covid Vaccine Intelligence Network (CoWin). The Indian private sector has also not been at the forefront of AI investment unlike in the US. It must be pointed out that India’s Union Government has, however, over several decades played a role in the growth of India’s world-class IT services export industry, through tax and land incentives and other support, and by staying out of the way of its growth.
Two years ago, the Government announced its India AI Mission, which was approved by the Cabinet in March 2024, with an outlay of Indian Rupees (INR) 10,371 crores (about USD 1.2 billion). While this was a declaration of intent focused on AI research, developing computing power and industry collaboration, it is less than a year old, with funding proposals and modest budgetary allocations made in the past year. As per the Ministry of Finance’s expenditure budget documents, the AI Mission was sanctioned INR 551.75 crores (USD 64 million) during the Union Budget 2024-25. Even this relatively modest amount was significantly underutilized, leading to a budget revision to a much-reduced figure of INR 173 crores (USD 20 million).
INR 2000 crore (USD 232 million), or nearly 25% of the entire India AIMission budget, has been approved as part of the most recent Union Budget 2025-26 announced on February 1, 2025. This comes on the heels of the Indian government’s announcement that it was planning to fund the development of one or more foundational models just days after the release of China’s DeepSeek.
The government plans to procure and supply 18,693 Graphic Processing Units (GPUs) for usage by institutional and individual end-users. The initial tender is for 10,000 GPUs for which there have been ten L1 bidders who were assigned workloads in the second week of April 2025. The government has also announced that it will establish a new AI centre of excellence for education with an outlay of INR 500 crores (USD 58 million), in addition to the three centres of excellence in AI for agriculture, health and sustainable cities which the Union Finance Minister had announced in 2023.
AI-Powered Government 24/7 in India
Government 24/7, where digital platforms provide government-led public services any time and all the time, is largely about effective e-governance and automation. AI can play a crucial role and be pivotal in making their interaction both more effective and transformational.
Having AI Government 24/7 is very expensive. It is critical, therefore, and more important that all public investments made in this area are in the public interest, effective and efficient. The India AI Mission is an early step in India’s AI journey which is still largely aspirational.
E-governance, however, is not new in India. It goes back decades but has been fragmented, with a plethora of pilot projects. 24/7 Government has also been talked about for a few years but is still at an incipient stage, and while some important steps have been taken, AI has not played a significant role in this area thus far.
Some key prerequisites for AI powered Government 24/7 nevertheless exist in India and give cause for hope, both for the country itself, and for its potential Global South leadership role in this area. These prerequisites include India’s world class and now well established and recognized DPI, prominent among which are the UPI (a real-time payment system) and the Aadhaar (national biometric ID) identity system. In fact, the government’s Jan Dhan-Aaadhar-Mobile (JAM) trinity, a foundation for the ‘Digital India’ mission in the past decade, has the potential to contribute to AI Government 24/7. This refers to the government’s initiative to link “Jan Dhan” or basic banking accounts, mobile numbers and Aadhar cards of Indian citizens to plug the leakages of government subsidies, among its other objectives. All these foundational initiatives will, nevertheless, need to be made more inclusive and should be better harnessed to serve the public interest.
Allow me now to highlight the current state of play in India in some critical areas: scalability, transparency and accountability, inclusivity and financial innovation, including the use of real time financial systems.
Scale
In an aggregate sense, the scale in India is huge, by any global standard. India’s Aadhar covers 1.3 billion people. India has also used DPI in several areas. Its UPI payment system is an acknowledged global leader in ease of use, transaction value (INR 20.61 trillion or approximately USD 239 billion, in August 2024, a 31% increase over the previous year) and volume (14.96 billion in August 2024, a 41% year-on-year increase). The average daily transaction volume was 483 million and average daily transaction value was INR 66,475 crore (USD 7.7 billion).
Transparency and Accountability
24/7 government has markedly improved transparency and accountability in some areas. Good Indian examples include Direct Benefit Transfers (DBTs), real-time dashboards, and faceless services that minimize corruption and increase traceability. In India, services like Aadhaar, UPI, and DigiLocker also provide audit trails that ensure accountability.
DBTs: These are subsidies or welfare payments sent directly to beneficiaries’ bank accounts via digital infrastructure like Aadhaar and UPI. Such transparency in fund flows is possible because transactions are logged and traceable on a central platform 24/7.
Public Portals and Data Dashboards: Many government departments now publish real-time data online, from budget expenditures to service delivery metrics. For example, the Public Financial Management System (PFMS) dashboard shows fund transfers under schemes in real time, and the Aarogya Setu/CoWIN national platform (during COVID-19) provided live updates on health services. This was a health emergency related centralized exception in the health services area, which is a state, not central government responsibility in India. Citizens can/could access this information across the country anytime, thereby potentially, at least, holding officials accountable for outcomes.
Right to Information (RTI) Online: India’s 2005 RTI Act empowers citizens to request information. An RTI online portal now allows filings 24/7, so officials cannot hide behind office hours. This constant availability has bolstered transparency, as evidenced by numerous RTI-based exposés of irregularities. While there has been increasing dilution of the RTI Act in recent years, this needs to be reversed since this remains an important area to prioritize for AI Government 24/7 in the public interest.
DPI: This is an open, interoperable digital system for identity, payments, and data which inherently promotes transparency and inclusivity. By placing essential services on digital platforms, these are made accessible to all. As a result, DPI enables service delivery in a “transparent and accountable manner”, as noted by the UNDP and World Bank. As already indicated, the scale is huge by any global metric. The UPI processes billions of transactions openly and has an audit trail, making financial flows more transparent.
Online portals like the Centralized Public Grievances Redress and Monitoring System, (CPGRAMS,) enable continuous citizen engagement and redressal.
Dis-intermediated technology for AI Government 24/7
Dis-intermediated technology helps increase fairness and equity by eliminating middlemen. It does this by offering direct, online, faceless, 24/7 government services to the public. Prominent, tested examples include online transport services in Delhi and DBT. These increase trust and efficiency, in addition to reducing rent-seeking behaviour.
The DBT end-to-end digital process, for example, eliminates intermediaries and leakages, reducing corruption. In fact, by digitizing payments, India is estimated to have saved over USD 27 billion in several schemes due to the removal of duplicate or fake beneficiaries and bribery opportunities m.economictimes.com.
Faceless services like Delhi’s Regional Transport Office (RTO) and Indian Railway Catering and Tourism Corporation (IRCTC) ticketing have also reduced the roles of middlemen and touts. Services digitization, such as the passport seva, has also benefited from both disintermediation and better 24×7 citizen services. Tax filings have been another example where digitalization and user interface (UI) simplification has resulted in disintermediation.
This has not, however, been achieved in many other service areas yet, because they represent a level of complexity that makes the bar too high for end user/citizen access. Health and education are two critical areas which, because they are state subjects on the concurrent list of responsibility between the Union and state governments, pose a particular challenge. CoWIN, during Covid, was a notable exception in the health area. In education, a common updated 2020 National Education Policy (NEP) which encourages the use of technology in education has been developed but is still very incipient.
It should be noted that obtaining digital access does not, by itself, mean that disintermediation will be achieved. For example, many people still need to go to a cybercafe or booking agent for citizen services or even to book rail tickets, because of the complexity of services or UI, both in central systems like rail ticketing, or state services like stamp papers or other citizen services. This becomes an added barrier when added to language issues.
Other challenges remain in the provision of health and tax services through dis-intermediated technology, but digital interfaces and standardization are slowly but surely curbing intermediary dependency. AI needs to be more proactively used to help fill critical ‘disintermediation gaps.’
Skilling and Re-skilling
24/7, ‘digitalized’ and disintermediated government services require fundamental changes in skills for both ordinary citizens and government employees as a prerequisite. They also have significant employment implications.
Key skilling areas include digital literacy for citizens, re-skilling government employees for e-governance and AI, cloud and cybersecurity training. A recent training for teacher counsellors from Tamil Nadu, one of India’s most technologically and industrially advanced states, indicated low or no use of AI by them in the classroom, exposing a growing digital divide between many teachers and some of their students who are much more proficient in AI and technology usage more generally.
Teachers and thousands of government officials are also worried that they will no longer be needed for citizen interface if AI Government 24/7 is successful. This does pose a challenge unless they are rapidly and effectively re-skilled for other gainful and decent employment.
Significant skill and capacity gaps continue to exist in both government and other critical information infrastructure (CII) areas (e.g. telecom, banking, healthcare). A particular high-risk area in India for both government and CIIs is from cyber-attackers and cyber leakages because of the inadequacy of effective cybersecurity which becomes more and more crucial as services leverage authenticated identity.
Scaling DPI with AI
AI can enhance and scale-up DPI with tools like chatbots, personalized services, automated back-end workflows and predictive analytics. India’s Bhashini initiative which seamlessly converts text and voice from one language to another, its MADAD (help/assistance) chatbot and UPI’s integration with AI are examples. Such integration makes AI Government 24/7 proactive, inclusive and accessible round the clock.
India’s Open Network for Digital Commerce (ONDC) is attempting to break the e-commerce ‘duopoly’ of Amazon and WalMart/Flipkart), while its CoWIN made vaccinations easy to track during COVID-19.
Driving the AI 24/7 Governance Agenda: Key Institutions
Successfully achieving uniform digital platforms across the country requires a strong but genuinely democratic and accountable central government, and often, in countries like India, and in many others in the Global South, the leadership of the Prime Minister’s Office (PMO).
Key actors in any government should, at a minimum, include the IT and Electronics Ministries, the PMO, the Planning Ministry and state governments (in a decentralized federal system like India). A dedicated task force for 24/7 services should be created to coordinate inter-ministerial and centre-state implementation. Judicial and legislative support will also be necessary for policy and legal frameworks.
Effective Data Utilization
There is an enormous amount of underutilized data in India which the government has low capacity to handle (e.g. the Ministry of Home Affairs—MHA—data on cybercrime, or the Computer Emergency Response Team-CERT-In’s data on cyber breaches). This needs to be addressed as a matter of priority especially in areas such as cybercrime where India can learn from Japan’s example in this area.
India’s corporate private sector, especially in banking and other services sectors, however, are using AI effectively to study and use large data pools (credit scores, recharge of mobile phones re: propensity to pay, human resources applications).
Urban and Rural Infrastructure Readiness and Financing
This is a critical area for all countries, especially in the Global South. Compared to most countries in the Global South, India’s aggressive investment in rural connectivity (95% villages covered telecom.economictimes.indiatimes.com) and its low-cost data (amongst the cheapest mobile data rates globally) stand out, despite its still needing to improve service quality and digital literacy to truly capitalize on its infrastructure. Its internet reach (55% population, with rural users now exceeding urban news.abplive.com) is impressive for a populous lower middle income country in the Global South.
In comparison, while Brazil has 85% overall internet usage, only 75% of rural households had internet in 2021 gov.br indicating that even middle-income countries face a rural lag. Indonesia (another populous middle income nation) currently has about 74% penetration, but many remote villages lack 4G and there’s a “massive rural-urban digital gap” bmz-digital.global bmz-digital.global. Nigeria has a lower 45-50% internet penetration datareportal.com and struggles with electricity reliability, making 24/7 digital services challenging outside major cities.
While India’s urban infrastructure (fibre networks, 5G, data centres) is largely ready for 24/7 governance (cities like Delhi and Bengaluru have extensive connectivity), rural infrastructure still has gaps in last-mile access and service quality. Bridging this will require significant financing. The BharatNet project (connecting all villages by fibre) has run into financing delays and cost escalations and the nation-wide Community Service Centers (CSCs) have been slow to take off as a result. BharatNet’s amended phase aims to cover India’s remaining villages and give 15 million rural homes fibre connections, which will need both continuous and significant funding. telecom.economictimes.indiatimes.com.
Financing must be a public-private mix (PPP). This will need to include government funding to ensure universal access, and private investment to innovate and maintain advanced services. Innovative financing models like infrastructure bonds, development loans (from World Bank for digital inclusion), or license obligations for telecom operators can be used for this purpose. Both government public finance (through programs like BharatNet, the Digital Bharat Nidhi—DBN, previously known as the Universal Service Obligation Fund) and private telecom investments (possibly incentivized by new revenue streams if the e-services uptake increases) must complement each other to enable the realization of AI Government 24/7 across India’s urban and rural divide.
The potential for PPP on the ground for health care services is somewhat stymied because of recent Union government constraints on the work of NGOs and private foundations such as Ford and Gates.
The private sector is playing a role in infrastructure financing and delivery in areas like telecoms (Jio and Airtel have invested heavily in 4G/5G networks even in rural areas, driven by the large user base). They will, nevertheless, need incentives to extend their coverage to less profitable remote regions. The government’s DBN subsidies for rural towers telecom.economictimes.indiatimes.com) will be key to bridging this gap. Similarly, power companies will need public finance support to strengthen rural grids.
Some Overall Challenges for AI Government 24/7 in India
E-governance projects have sometimes been unnecessarily reinvented from scratch while model projects have not often been replicated, and common, open-sourced resources have not been pooled.
Effective AI Government 24/7 and governance requires a level of standardization. This is a unique challenge in a country like India given its diversity, pluralism, breadth and complex centre-state relations. These attributes give rise to huge state to state, interface and language differences, just to mention a few challenges. Adequate standardization is just not happening in this context and may never be fully possible even if the social, religious and political divides across the country, especially between its North and South were not as large as they are in today’s India.
The equity, inclusiveness and citizen empowerment aspects of AI Government 24/7 in the genuine public interest need enhancement and a much bigger, strategic push (e.g. beyond tax, passports). Education and health pose a specific challenge, as already indicated. While there has been some good progress in dis-intermediation, there are still miles to go. AI Government 24/7 also needs proper skilling and a truly universal physical internet infrastructure that works round the clock, every day of the week.
Major gaps also remain in many central and most state government services while UI remains a major problem affecting migrant populations (estimated at over a quarter of India’s 1.4 billion population). It is also necessary and should be possible to improve user experience (UX) significantly. AI can be used to reduce complexity to improve the accessibility of citizens. More broadly, there is a need to develop a more comprehensive and effective ecosystem for AI application for Government 24/7.
While digitization and AI can help, they cannot fill in for missing services or investment. Take the example of trauma care. A half-million Indians die annually because of trauma (including 150,000 in road accidents annually) because they do not get help. India’s healthcare spending is grossly inadequate (less than 2% of GDP in the most recent February 1, 2025, Union Budget 2025-26). Despite some good work done in some states like Tamil Nadu through TNAI, there is currently no common number to call for life-threatening situations or traumas in India (although the MHA is attempting to roll out 112 as ‘India’s 911’). Moreover, no location-independent assistance is assured, unlike in the US, EU or UK. Even in this far from desirable situation, telecom and digital platforms can help. India can also learn from the US’ enormously successful 911 program, enhanced now with location and other technologies.
A cautionary note is also in order from a good governance and human rights perspective. AI Government 24/7 can be a double-edged sword especially in electoral or other autocracies since it gives the central government enormous power, control and oversight over citizen data and activities (e.g. in India, almost everything is now based on authentication using the national Aadhaar Card and a person’s mobile number). This is understandably worrying to many citizens who prioritize their data privacy, security, safety and independence of thought.
India’s Potential Niche in the Global South
Despite some limitations, based on the facts and analysis just presented, most experts will, no doubt, agree that India has both adequate credibility and potential in this critical area for it to play a leadership role in the Global South on AI Government 24/7.
For this reason, as well as perceived shared democratic values, Indian Prime Minister Modi was asked to Co-Chair the recent February 2025 Paris AI Action Summit (AIAS) with President Macron. This is despite China now being at AIs technological forefront and frontier. This was a welcome development which India needs to build on from a public interest perspective for the benefit of the Global South.
India also showcased its DPI during the country’s 2023 G20 Presidency where it secured support for a future “One Future Alliance”, a proposed mechanism for G20 members and institutions to pool funds to sponsor DPI deployments in developing countries of the Global South (with contributions from India, the World Bank and others). It is also a key part of the Global South Alliance for Digital Governance and has advocated for “digital sovereignty” and “tech neutrality” at the United Nations and through the Digital Cooperation Organization. It has expressed high concern about its strategic autonomy being violated by dependence on foreign services and platforms that could be subject to sovereign action, e.g. US sanctions that cut off payment services (SWIFT, Visa, Mastercard, Amex) to Russia after its illegal invasion of Ukraine.
As a result of this, India has advocated for a federated, open-source model in global forums. These include its Modular Open-Source Identity Platform (MOSIP), a national ID system and other approaches including its focus on UPI and RuPay (first of its kind Global Card payment network from India with wide acceptance at shops, ATMs, and online outlets) with strong government backing.
Open standards, data localization, national clouds, and initiatives like India’s MOSIP offer countries modular and open-source technology to build and own their national identity systems to maintain their autonomy. Universal coverage and accessibility emphasizing inclusion is a key principle. To-date, 26 countries across the Asia-Pacific, Africa, Latin America and the Caribbean have registered on it.
The advantages of such platforms include no vendor lock-in, transparency, customization and resilience. The challenges are that they require local capacity, security oversight and funding. Coordination on standards and sustainability also remains a challenge. A major legitimate concern many of them have is that India could switch them off just like what happened with the US on SWIFT for Russia after its illegal invasion of Ukraine.
While India does speak a lot about open-source or ‘atmanirbhar (self-reliance/self-sufficiency) platforms’, it must be pointed out that there remains near total dependence by it on proprietary platforms like Windows, despite talk of using the Bharat Open-Source Software (BOSS) for military and government use. Most of its DPIs, including the technology behind Aadhar and UPI, is not open source at all.
While global big technology platforms (Microsoft, Google, Visa/Mastercard) powering most tech services including government ones have, by and large, delivered so far, sovereign concerns about them have grown, especially around the ability of the US to shut off services, especially after Russia’s illegal invasion of Ukraine. This is obviously a special concern for an AI digitally powered 24/7 government, making sovereign control of digital platforms and data a high priority for governments. ‘Sovereign clouds’ are one suggested solution by Big Tech (Microsoft, Amazon Web Services).
Financing AI Government 24/7 in the Global South
Financing can come from national budgets, multilateral agencies, PPPs and philanthropy. India’s role could include sharing expertise (India Stack diplomacy), providing grants and other forms of aid, and advocating global funds for DPI. India’s partnerships with Nepal, Bhutan, Singapore, and Africa show the value of a growing digital soft power strategy.
South-South Cooperation bonds, PPPs for telecon infrastructure, big tech digital inclusion (Microsoft’s Africa’s broadband) and crowdfunding are all needed to structure these partnerships to guarantee the public interest (affordability, open access in this context).
The bigger finance question for AI Government 24/7 is the same as the finance question for e-governance, and answers should be similar. All governments need to budget for technology, digitalization and cybersecurity. Multilateral and development agencies can play a role in financing these for countries struggling to do so themselves, especially to influence quicker adoption, in the same manner that the UN and multilateral development banks (MDBs) are supporting or financing renewable energy (RE) and green power projects across the Global South.
Acknowledgements: My talk for the Boston Global Forum Conference on the Boston Finance Accord for AI Governance 24/7 held at Loeb House, Harvard University on April 22, 2025, was based on this paper. I would like to thank Mr. Prasanto K. Roy, Advisor, FTI Consulting, for multiple valuable discussions and for his inputs for the preparation of this paper.
ABOUT THE AUTHOR
Kamal Malhotra is Distinguished Visiting Professor, NALSAR University of Law, Hyderabad, India; Non-Resident Senior Fellow at the Boston University Global Development Policy Center and has recently also Guest Lectured at the School of Interwoven Arts and Sciences (SIAS), Krea University, India. Prior to his retirement from the United Nations in September 2021, Mr. Malhotra had a rich career of over four decades as a management consultant, in senior positions in international NGOs, as co-founder of a think-tank, FOCUS on the Global South, and in the United Nations (UN) including as its Head in Malaysia, Turkiye and Vietnam (2008-21). He was UNDPs Senior Adviser on Inclusive Globalization, based in New York, USA, for most of the prior decade. Mr. Malhotra is widely published.
