From San Francisco to Sydney, cities and countries are on a race to lead the AI wave. Stanford AI Report, 2022 puts private investments into AI at $91 billion, and Goldman Sachs estimates this to reach $160 billion by next year — an astonishing doubling in just three years.

While the US is leading the race as of now with almost 60 per cent top-tier researchers there and over $31 billion in funding, China is fast catching up, with the UK, Israel and Canada in the top 5; India is trailing at a distant seventh with just over $3 billion in investments.

Silicon Valley is definitely the citadel for this breakthrough AI tech and prominent ventures. The US has been actively providing grants for AI research, starting with over $3 billion in 2022, which perhaps led to the leadership position. By 2027, the Chinese government is expected to invest about $40 billion. In comparison, India has budgeted only $1.2 billion towards its AI mission.

If we want to lead this race, we need to do more than just funding. Achieving a competitive edge in AI requires strategic investments and sound policies. The Finance Minister should have allocate sufficient funds for direct and indirect investment in AI education and talent development. In reality, India has to strengthen its STEM (Science, Technology, Engineering, and Mathematics) education and stop the brain drain, like China has done for some time now. The Chinese are funded to go abroad for studies and are encouraged to return to their home country for leading innovation. Most Indians go abroad for jobs while the Chinese return home to help the country prosper

India must implement a robust STEM programme from early education through higher education. IITs are still behind global top institutions like MIT, Stanford and CMU in terms of pedagogy and curricula.

We also need to specifically promote AI specialisation. A few institutions have developed such AI courses and degrees but these are in spite of the government policies. The US, through institutions like Carnegie Mellon and Stanford, offers comprehensive AI programmes and research that produce top-tier talent.

The second aspect is boosting R&D efforts in AI, by increasing public and private funding. Take China where a significant investment in AI R&D has led to rapid advancements and a surge in AI-related patents. India should also set up AI research centres in IITs including dedicated innovation hubs. Collaboration between academia, industry, and government is essential to drive innovation. Germany’s Cyber Valley initiative brings together universities, research institutes, and companies to work on AI projects.

The third aspect to lead the race is in creating a supportive regulatory mechanism. The government can start with an AI-friendly policy that supports innovation while addressing ethical and societal concerns. The European Union’s regulatory framework is a good example to balance AI advancement with privacy and ethical considerations. We should also ensure robust intellectual property rights to protect AI innovations, and this is needed for attracting private investments in start-ups here.

Build an ecosystem

Fourth is about building an ecosystem around AI and innovation clusters. Bring together start-ups, investors and researchers just as how the Silicon Valley has done. Extend financial incentives planned for manufacturing sector to AI. The Budget must offer grants, tax incentives, and funding opportunities for AI start-ups and research projects. Israel’s start-up ecosystem benefits from government grants and a supportive venture capital environment — one reason why it is in the Top-10. Also, PPP models must be encouraged to promote AI development.

Finally, leverage AI for economic and social benefits like healthcare, education, and transportation. Estonia uses AI to streamline government services. India must also encourage industries to adopt AI to enhance competitiveness.

The writer is a Fortune-500 advisor, start-up investor and co-founder of the non-profit Medici Institute for Innovation

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