New Delhi, Dec. 29 -- As we close to the end of 2025 - what I have realised is that many Indian businesses now have clearer vision of what they want to build, and are actively building it. At the beginning of last year, only a small fraction of Indian enterprises had AI in production. Today, a growing majority does. Looks promising as we progress with time.
India has rapidly moved beyond the "pilot and prove" phase. The national conversation has shifted from curiosity to capability, from "can AI help us?" to "how do we scale it responsibly, securely, and meaningfully?"
With more than 1.4 billion people - 65% of them under the age of 35 - India is generating unprecedented volumes of digital activity. Every click, payment, interaction, or transaction is generating data. From rural mandis to metro stations, India is pulsing with real-time signals - and AI is rapidly becoming the intelligence layer that translates this into actionable insight. I feel we are not just adopting AI; we are reimagining it for 1.4 billion people, 22 languages, and infinite contexts.
The question is no longer if AI will change India. It's how India will change AI.
2026 will be the crucial year - not just for what we build with AI, but for how we build it: responsibly, inclusively, and at scale. Here are five trends that will shape the future of AI in India and offer a lens into what lies ahead.
1. From Agility to Optionality: India's New Strategic AI Imperative
Agility helped Indian businesses survive the last three years. But 2026 will demand more than agility - it will demand optionality.
Amidst economic uncertainty, supply chain recalibrations, and geopolitical shifts, Indian boards are embracing a new AI mandate: the ability to adapt, pivot, and reroute decisions in real time without disruption. And that's only possible with AI systems that sense change and act instantly.
Take travel and logistics. A weather-triggered disruption in Bangalore should instantly cascade AI-driven decisions across pricing, rebooking, inventory, and customer experience - no human loop required. These are not hypotheticals. These are real-time AI systems in action, and in 2026, more industries - from education to healthcare to manufacturing - will adopt them.
Optionality is also a matter of digital sovereignty. India's growing emphasis on self-reliance, through initiatives like the IndiaAI Mission, is not just about infrastructure - it's about building intelligence that understands context, language, and lives at the edge of every decision.
2. ROI Redefined: From Cost Saved to Opportunity Unlocked
AI adoption surged in 2025 - but so did skepticism. In boardrooms and budgets, leaders now demand measurable outcomes, not experimental enthusiasm.
The real shift in 2026 will be a redefinition of AI ROI: from short-term savings to long-term growth. Leaders will ask: What new markets can we enter? What processes can we reinvent? What experience can we personalize at scale?
According to a recent EY India C-suite GenAI survey, 47% of Indian enterprises already run multiple GenAI use cases, and nearly half have moved over 21% of their AI pilots into production. But board scrutiny is intensifying. Success won't be defined just by AI's novelty - but by its contribution to revenue, resilience, and relevance.
This will force Indian enterprises to move away from vanity metrics and embrace stream-level intelligence - where every insight is traceable, verifiable, and monetizable.
3. The Rise of Agentic AI and the Age of 'AIQ'
We are now entering the age of Agentic AI - where AI systems don't just assist, but act on behalf of humans.
As per Forrester, 24% of global leaders have already begun deploying agentic systems. In India, this will fuel a tectonic shift in how businesses operate, how talent is reskilled, and how workflows are reimagined. But here's the challenge: few enterprises are truly ready.
Why? Because most still struggle with data silos and integration challenges. The future belongs to those who "eat their data vegetables": build unified pipelines, clean data lakes, enable continuous movement of data, and reinforce governance.
This also means that AI literacy will become a national priority. According to Forrester, 30% of large enterprises will mandate formal AI training by 2026 to raise their AIQ (Artificial Intelligence Quotient). India's skilling missions - especially for engineers and public sector employees - will need to embed AI fundamentals into national workforce development.
4. Small Models, Big Impact: SLMs and Sovereign AI Will Drive Local Innovation
India's bet on Sovereign AI is beginning to pay off. With an investment of INR 10,000+ crore and access to over 40,000 GPUs, the IndiaAI Mission is catalysing the development of Small Language Models (SLMs) that are efficient, language-aware, and compute-light.
Unlike massive global models that require enormous infrastructure, SLMs are designed to work in local languages, local contexts, and lower-power environments - making them ideal for India's Bharat footprint. This is vital for diversity and inclusion. India changes every 100 kilometres - from dialect to data density, climate to cuisine. AI must respect that diversity, not flatten it.
The future isn't about building a giant AI brain - it's about building millions of smart, localized agents that work with teachers, farmers, nurses, and citizens in context. SLMs, paired with Sovereign AI infrastructure, will strengthen India's role as a builder - not just a user - of responsible, inclusive AI.
5. Responsible AI 2.0: Governance, DPDP, and the New Trust Mandate
As AI evolves, trust will become currency. And governance will be the bank. India is taking bold steps in this direction. The DPDP Act (Digital Personal Data Protection Act) is now in motion, laying down a clear legal and ethical framework for data usage and AI accountability. Combined with sectoral regulations like RBI's FREE-AI framework for financial institutions, 2026 will usher in the era of Responsible AI 2.0.
This means traceable models. Auditable decisions. Ethical datasets. And a clear line of sight from training to outcome. The days of "black box" models are numbered. For AI to truly serve 1.4 billion Indians, it must be explainable, defensible, and justifiable.
This will also affect vendor dynamics. As fragmentation increases, most enterprises will need to compose "agentlakes" - federated architectures that orchestrate multiple agent ecosystems across infrastructure. Composability, interoperability, and cost-awareness will define the new stack - especially for India's growing AI startups.
Is AI Building India - or Is India Building AI?
In many ways, we are witnessing the early signs of a tech inversion. India, once seen as a service adopter, is becoming a model creator.
Indian startups are redefining sectors like chip design, AI cybersecurity, smart mobility, and edge intelligence. Government-backed missions are aligning regulation with innovation. Enterprises are not just using AI - they are evolving with it.
Gartner predicts that India's IT spending will surpass $176 billion in 2026 - with AI-enabled software and data center systems leading the surge. And as GenAI becomes embedded into every app, every service, and every workflow - AI will become infrastructure.
But for AI to work at this scale, its answers must rest on credible, accountable sources whose authority can be traced and verified. This is not just a technical challenge - it's a societal one.
So, we must ask: Is AI building India, or is India building AI?
If it's the latter - are we ready? Are our systems resilient? Is our workforce trained? Are our models inclusive? Is our governance strong enough?
The opportunity is immense. The momentum is real. But the responsibility is ours. To make AI meaningful for every citizen - not just every CTO or CEO.
After all, even the most powerful intelligence is only as impactful as the context it understands. And if there's one country where context changes every 100 kilometers - it's India.
Published by HT Digital Content Services with permission from TechCircle.