India Inc is failing the country in AI and deep tech due to its dhandho mindset

As the US moves to restrict top AI models, and the world transitions to an AI and deep tech economy, India is staring at some grave challenges. The blame, not entirely but largely, lies with India Inc and its dhandho mindset.

In Short

• India is falling behind in AI and deep tech race
• Indian stock markets reflects the changing economic realities 
• Indian companies rarely focussed on R&D

On Friday, there was another harrowing day in India's stock market. The IT stocks, yet again, took a beating with Infosys ending the day around 6 per cent down. It was one of many such harrowing days the Indian stock market has seen this year. It is going to be one of many such harrowing days that the Indian stock market will continue to see this year. All because India Inc can’t muster the courage to do what it should have done years ago.

Let’s start with the tale of two AI products. Sarvam AI, at least from the looks of it, is arguably the best AI model in India at the moment. Yet, reports suggest Sarvam has struggled to raise enough money to move to the next stage. Although last Monday the company announced Series B funding of $300 million, it pales in comparison to what even small AI companies are raising in the US and China.

For several reasons, global investors like Softbank have been wary of Sarvam. But a bigger tragedy is that no Indian company, except HCL Tech, has stepped forward. Not TCS, not Infosys, not Reliance, not Tata. No one is willing to put in a billion or two in it.

Then there is Peter Steinberger, an Austrian engineer who went viral in January. Few had heard his name earlier. In January, Steinberger became one of the most discussed names among the tech bros sipping craft beer in bars of San Francisco. He had created ClawdBot, later renamed OpenClaw, and had set the world of AI on fire. Within days, his phone too was on fire, with calls coming in from the biggest billionaires of Silicon Valley.

OpenClaw as a product is not exactly cutting-edge technology. It was more of a hobby project for Steinberger. But the idea seemed sound. In Valley a good idea in hand is worth two birds in the bush. OpenClaw was in demand. In mere two weeks, Steinberger announced he was joining OpenAI. Sam Altman reportedly spent tens of millions of dollars — exact figure has not been made public — to get Steinberger and OpenClaw.

I talk about OpenClaw and Steinberger to highlight how Silicon Valley companies move. As well as the difference with which ideas like OpenClaw and Sarvam AI are treated, merely because they exist in different parts of the world.

Silicon Valley companies are constantly punting. Even when they are not big, they are burning money on ideas that may or may not result in something substantial. They punt even if it flies in the face of common sense, logic and practicality. They are the exact opposite of the dhandho mindset, which rules the boardrooms inside India Inc.

The cracks in the Indian IT story have been visible earlier as well, but now they threaten to bring down the entire edifice. AI and deep tech are remaking the world. In this new world, India is looking like a loser because its companies, including the storied giants like TCS and Infosys, are pusillanimous. They are too much of cowards to dream beyond their billable hours and dividends. They have money but little foresight and imagination. The most innovative they have been so far is in creating a mechanism that lets them hire entry-level engineers at a package of 4LPA and then charge the clients, so the company can earn Rs 4.5 LPA from each of its engineers.

Though, why single out the IT giants. India Inc on the whole is failing the country. Indian IT giants are looking at adverse business prospects due to AI tools from Anthropic, Google and OpenAI. The BSE and NSE have taken a beating because money is moving out in search of AI and deep tech stocks, which India cannot offer. The bull is surging and dancing in Taiwan and South Korea but not in India.

Not just the stocks and business prospects, India now risks losing its strategic position in the world because India Inc cannot look beyond its current balance sheet. Last week, the US banned the use of advanced AI tools like Mythos and Fable 5 for the rest of the world. The move has already led to a lot of handwringing in the Indian spaces on X. Zoho’s Sridhar Vembu wrote, “Globalisation is dead and Bharat must find her own way ahead.”

Indeed, Bharat must. But how can it when India Inc refuses to invest in R&D and betting on ideas? How can it when there is not a single Indian company, even among the giants like TCS and Reliance and Infosys, that would dare to spend some $10 million (around Rs 95 crore) on a two-week old idea?

The figures tell a sordid story. It is no secret that India Inc is averse to spending money on research and initiatives that might not immediately bring returns. For example, take a look at the report titled “Study of Corporate Sector Data on Research & Development Expenditure by top 1000 Listed Companies in India.” Prepared in 2024, and supported by the Office of the Principal Scientific Adviser, the report shows the sorry state of R&D in India.

The report notes that in India R&D spend “as a percentage of GDP has stagnated around 0.7 percent, significantly lower than the global average.” It then says, “The current expenditure on R&D in India does seem incommensurate to its aspirations and its development agenda.”

One would like to believe that India’s biggest companies, and many of them happen to be IT companies, would be spending decently on R&D. But that is not what the Corporate Affairs report reveals. It finds the sectors that see the best R&D spends are Defence and Pharma. Then there is Auto, which too has a decent amount of R&D spending going on. Although in these sectors too Indian companies are significantly behind their global peers.

The R&D spending in tech is way down in the table. On the whole, Indian IT companies spent around 3.7 per cent of their total revenue on R&D in the year that the report covered. This is minuscule compared to around 15 to 25 per cent that Silicon Valley companies spend on R&D. The top IT companies are laggards of first order. For example, in 2022-23, Infosys spent just 0.9 per cent of its total revenue on R&D. The figure for TCS was 1.30 per cent. For Wipro it was 0.5 per cent while for HCL it was 1.60 per cent.

The other big companies don’t fare all too well. Reliance, a giant in every way, spent only 0.53 per cent of its total turnover on R&D in 2022-23. Tata Steel is at 0.67 per cent. Maruti Suzuki spent 0.65 per cent on R&D.

These are abysmal figures and a clear result of the dhandho mindset that rules India boardrooms. We all instinctively know what dhandho means. But to put some words to the feeling, I asked Gemini AI to define it. The AI hit the bullseye. Here is what it noted.

This is the approach of India Inc. Even the richest and biggest Indian companies follow it, instead of trying to create something suitable for the 21st century. Instead of fixing what needs fixing, they tend to talk hurr durr and this and that. They talk of challenges but not opportunities. They talk of risks but not rewards.

Even this week, at a time when it has become clear that the Indian IT story is unravelling, Infosys co-founder Kris Gopalakrishnan is quoting a user who has defended the IT giants on their risk-averse behaviour. And what is the defence? Well, a defence of something that can’t be defended, arguing that Indian IT is not made for innovation. It is like saying that a person is medically obese because he doesn’t jog and can’t help eating burgers. True, that explains obesity. But it is no solution.

The arguments trying to explain why India Inc moves like the way it does always end up with usual suspects. Corruption, policymaking, bureaucracy, lack of easy capital, laws and policies that punish instead of rewarding, and so on and so forth. True, these issues are real. But these are the issues that have plagued, and still plague, almost every place and every country on the planet.

In one way or another, challenges exist everywhere. A more fundamental issue, in my opinion, is that of egg and chicken. Or in other words, that of taking the initiative. It has to come from somewhere, and more often than not, the initiatives that change something come from the position of privilege. Even Karl Marx, the man who changed the world by his focus on the miseries of the poor and the proletariat, came from a privileged family.

One of the biggest tragedies of India is the absolute lack of ambition and imagination among most of its privileged people. It is the same lack of ambition and imagination that is reflected in India Inc. It will blame its ineffectualness on a thousand causes but will not open its purse and will not put its privilege to any good use.

- Ends