US-China AI rivalry: Lessons for India

The US-China rivalry on Artificial Intelligence (AI) is driving a wave of innovation. The release of DeepSeek from China sent shockwaves through global markets, chip suppliers, and related industries. However, a closer look reveals that the implications extend beyond just the US and China. There are valuable lessons for countries like India as well.

Prime Minister Narendra Modi’s vision of “double AI” ties India’s push for AI to the broader goal of an “Aspirational India,” framing it not just as a tool for technological progress but as a pillar of economic ambition. The Union Budget 2025 reflects this intent, with a significant boost in AI-related allocations aimed at fostering innovation and productivity.

Yet, while India is making the right policy moves, outcomes remain a different story. Unlike China’s DeepSeek or the US’s OpenAI, India has not yet produced a globally competitive AI firm.

This isn’t a drawback – comparing India to AI giants like the US or China misses the point. The real question is: what does a breakthrough like DeepSeek mean for India and the Global South? Instead of chasing parity, the wiser approach is to understand where AI is reshaping power dynamics and position India accordingly for the long game.

The Global South has long been priced out of cutting-edge technology, with Western AI models like ChatGPT and Gemini serving as luxury goods rather than tools for widespread use. This isn’t just a technological gap – it’s an accelerating asymmetry. DeepSeek flips the script. It undermines the existing order, making AI accessible to the very regions historically locked out. The takeaway here is that innovation is not just about creating the best model; it is about eliminating the greatest obstacles.

Washington believed its AI dominance was assured and sought to reinforce it by restricting China’s access to advanced chips, expecting the limitations to hinder progress. Instead, these constraints forced Chinese firms to maximise efficiency and innovate within their restrictions. Beijing, meanwhile, has been playing the long game. The rise of DeepSeek is no coincidence. It is a clear message that export control is not a silver bullet. It can yield unintended consequences. The US sought to slow China’s AI progress but ended up accelerating its adaptability. As barriers to entry fall, new competitors will emerge, forcing a rethink of how AI leadership is maintained in an increasingly unpredictable and polarised world order.

India’s AI ambitions are well-founded, given its thriving tech and startup ecosystem, where ideas receive steady funding across sectors. With AI at the forefront, the country’s deep pool of software talent provides a strong foundation for an indigenous firm to compete with global leaders like OpenAI and DeepSeek. Government policies and regulatory frameworks appear increasingly aligned to support AI-driven innovation. Coupled with India’s entrepreneurial momentum and the growing realisation that cutting-edge AI can be developed at relatively low cost, the conditions are ripe for a major breakthrough. With right incentives and infrastructure, India could soon establish itself as a formidable player in the global AI landscape.

Sameer Patil (L) and Sauradeep Bag

DeepSeek’s rise offers a reality check for India. If a relatively unknown Chinese firm can build a world-class AI model quickly and cheaply, there is no structural reason India cannot do the same—except for inertia. The lesson isn’t about copying China but about understanding what made its AI boom possible: relentless investment, a bias for execution over theory, and an ecosystem that rewards experimentation. India must do the same, or risk playing catch-up in a game that won’t wait.

The global AI ecosystem has recently found itself preoccupied with Jevon’s Paradox—a concept highlighted by Microsoft’s Satya Nadella in a recent social media post. It posits that as technological advances make the use of a resource more efficient, the overall consumption of that resource can actually rise. This counterintuitive outcome arises because lower costs stimulate higher demand. If this does hold water, India’s size potentially makes AI the next frontier in usage and growth.

(Sameer Patil is Director, Centre for Security, Strategy and Technology, Observer Research Foundation. Sauradeep Bag is an Associate Fellow at the Centre for Digital Societies, Observer Research Foundation.)