Artificial Intelligence: Indian AI market predicted to reach $17 billion by 2027: Report

AI and ML Jobs

According to a new report by BCG and IT peak body Nasscom, the AI ​​market in India is growing at a CAGR of 25-35% and is expected to reach approximately $17 billion by 2027. As investments in AI continue to rise, the demand for AI talent in India is also expected to grow at a CAGR of 15% by 2027, said the report, titled “AI-Powered Tech Services: A Roadmap for Future-Ready Enterprises, Role of AI and GenAI in Accelerating the Industry”, released on the sidelines of the Nasscom Technology & Leadership Forum 2024.

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According to the report, AI and ML have emerged as the top IT spending category expected to be made by IT buyers in 2023. This growth is driven by multiple factors including increasing enterprise tech spending, expanding AI talent base in India and significant increase in AI investments, the report said.

Globally, investments in AI have registered a CAGR of 24% since 2019 and are expected to invest nearly $83 billion in 2023. The majority of this was in horizontal AI applications in data analytics, GenAI, ML algorithms and platforms.

Notably, around 93% of investments by Indian technology services companies and Made in India product companies are focused on digital content, data analytics and supply chain.Amid rising technology spending by enterprises, technology service providers are developing a range of AI-based services and solutions to expand their offerings beyond traditional IT services.

This includes developing proprietary AI and GenAI platforms, automation tools, data analytics solutions, and custom AI applications for specific industries such as healthcare, banking & finance, and retail.

According to the report, India currently has the second-largest talent base in the world with 420,000 employees working in AI-related roles, and also has the highest skills penetration rate with three times more AI-skilled talent than any other country.

According to the paper, India has seen a 14-fold increase in AI skilled talent over the past seven years, putting it in the top five countries. Additionally, India's tech industry has already seen an increase of more than 15% in AI/ML-related jobs over the past 12 months, with roles such as AI engineer growing 67% year-over-year.

Recognizing the importance of human capital on the AI ​​journey, leading companies are investing heavily in upskilling and reskilling their employees on AI and related technologies, with some organizations planning to allocate $1 billion for upskilling over the next three years, according to the report.

“These enterprises are not just adopting AI – they are redefining service delivery, creating greater value for customers and setting new industry standards. Accelerating this journey requires massive investments in AI skills, investments in ethical and secure AI development practices and governance frameworks, and a fundamental shift towards a human-centric approach that prioritizes transparency and human oversight,” said Debjani Ghosh, president, Nasscom.

“Indian enterprises are starting to catch up with the growth of AI, and the technology sector is building future-ready organizations with dynamic and evolving centers of excellence to drive the AI ​​agenda,” said Rajiv Gupta, managing director and senior partner at BCG.

According to the survey, 70% of respondents have a clear framework for funding use cases. Additionally, over 70% of companies have AI partnerships, primarily with GenAI or cloud partners.

Companies are hiring dedicated AI leaders and getting strong CXO leadership support for their AI agendas, the report said. The survey found that more than 68% of respondents have a dedicated executive leading AI initiatives. Additionally, more than 58% of respondents have senior executives who are committed to AI initiatives.

Amid growing focus on AI governance, the report said that majority of enterprises have put in place bespoke AI governance frameworks with oversight from functional stakeholders.It was found that enterprises have established dedicated AI steering committees that meet frequently on issues such as funding and investment, security/IP/regulatory compliance, monitoring results of pilot use cases, prioritizing use cases for client production, and evaluating outcomes of client-facing products.

Additionally, we found that 90% of the top 25 providers are working on Gen AI skills development at scale. Nearly 80% of companies are actively working to embed new AI-specific roles across the organization and ensure the necessary upskilling of existing employees. This includes Chief AI Officers, AI Architects, AI/ML Governance Specialists, and AI Ethics and Compliance Officers.

The report recommends that Indian technology companies looking to drive the AI ​​agenda need to focus on three key challenges: First, developing a customer-centric go-to-market strategy by understanding people's willingness to try and pay for AI solutions and offering high-value, scalable products and services.

Second, fill the skills gap through a structured approach to strengthen the technical and business acumen of all teams. Third, rethink the operating model by adapting delivery structures and encouraging cross-functional collaboration to sustain innovation and growth in a rapidly changing technology environment.
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