Sam Altman, the eccentric founder of Open AI, may think that India is not capable of building something like Chat GPT with $10 million – but India has remained a consistent overperformer relative to its GDP in technology and innovation. It is ranked 67 positions ahead of its expected position corresponding to per capita income in the UNCTAD Technology and Innovation Report 2023, up from 65 positions ahead of expectations in the 2021 report.

There surely are other overperformers such as the Philippines and Vietnam, however the size of their economy and young workforce isn’t comparable to India. This makes India an important player in frontier technologies.

Growing market

The 2023 Report 2023 highlights that frontier technologies such as AI, drones, electric vehicles, solar photovoltaic, internet of things are poised to grow to a $9.5 trillion market from the present $1.5 trillion. Developing economies do not yet have the capacity to take advantage of these frontier technologies, but some developing countries are outliers and India is the foremost one among them.

A key issue regarding frontier technology is regulation. Regulation in these industries is still shaping up, as regulators and in some cases the companies that operate in these industries themselves are coming to terms with the scale of impact and disruption that these industries can cause.

According to WEF, 127 countries have passed AI regulations. However, most of the discussions around regulation are still centered around the developed world. Given that emerging economies account for 60 per cent of world GDP, global regulatory frameworks must take these economies into account.

Calderon and colleagues in their 2021 HBR article highlighted a key issue of interoperability that may hinder the growth of AI in other markets. Expectations may differ between geographies and hence it is both complex and costly to develop algorithms customised to each country, at least in the initial phase.

This leads to the potential of multilateral governance initiatives that may arise in such a space. There are already existing multilateral initiatives from the G7, G20, European Union among others. These multilateral arrangements must not ignore the requirements of the developing world. Some of the challenges that exist with AI in the developed world may be exacerbated in developing countries.

For instance, racial and gender bias regarding loan financing and credit card applications has been detected in AI algorithms in the US. If such algorithms are brought in without understanding local contexts in developing economies, they may hamper the progress made in societal inclusion.

AI potential

Further, emerging economies also need to understand the potential benefits that AI businesses can bring and ensure that there is an effective system of checks and balances as most nascent industries function in a regulatory void.

According to a 2019 note by David Strusani for International Finance Corporation, AI is already in use in many emerging economies in domains such as financial services, agriculture, and telemedicine. A key challenge that the report identifies is the threat to export-led manufacturing.

China, Japan and South Korea took advantage of the skilled low-wage labour for their economic success. AI can threaten this path for developing countries like Vietnam, India and Bangladesh which are following a similar path, and thereby challenge the existing job generation potential by replacing some jobs, leading to higher unemployment. Emerging economies must consider the effect of AI before large-scale adoption.

Privacy, security, and lesser algorithmic biases are essential for the ethical use of AI, as AI can exacerbate existing concerns. According to a 2020 UNCTAD report (https://tinyurl.com/4akctes8), developing and least-developed countries (LDC) are significantly behind as far as these laws are concerned.

For instance, while 89 per cent of developed countries have laws for privacy and data protection, the corresponding number is 63 per cent for developing and 43 per cent for LDCs. On consumer protection, while 80 per cent of developed countries have legislation, only 48 per cent and 40 per cent for developing and LDCs, respectively have such laws.

Emerging India

India has the highest AI skill penetration rate, as the AI Report 2023 by Stanford University. It is the only emerging economy apart from Brazil in the top 15. Bulk of the private investment is in the US and China at $248.90 billion and $95.11 billion. The only emerging economy in the top 15 is India with an investment of $7.73 billion.

A similar trend exists for the newly funded AI companies as well with a bulk of them being from US (4,643) and China (1,337). India seems to be the only bright spot in the emerging economies, with 296 AI companies.

Other emerging economies need to step up in terms of both skills and investments in AIif they want to benefit from it fully.

Sinha is Additional Private Secretary (Policy & Research), EAC-PM; Panda is Ph.D Scholar at Texas Tech. Views expressed are personal.