Artificial intelligence (AI) is a field of data science that trains machines to learn from inputs, adjust to inputted fields and criteria, and perform tasks of computational logic that match certain hu­m­an cognitive levels. Over the past few years, AI has emerged as a primary data science function, by utilising advanced algorithms and ever-increasing computing po­wer. AI is transforming business domai­ns and organisations as AI algorithms are now designed to make real-time decisions and interpret various types of data and media.

AI is no longer an emerging technology. As a function, it has pervaded almost all industries and functions – from e-comm­er­ce to BFSI and from manufacturing to agriculture. As such, AI is being increasingly utilised across several business-to-business, business-to-consumer, and even consumer-to-consumer channels.

A look at some of the growth drivers of the AI market, key use cases of the technology across sectors, challenges facing the AI market and outlook…

Growth drivers

The Covid-19 pandemic

The pandemic has increased the level of digitalisation across organisations over the past two years. Previously, businesses were hesitant to explore new-age technologies such as AI, internet of things, cloud and blockchain. However, the dynamics have changed now. As per an International Data Corpo­ration (IDC) report, 80 per cent of organisations have implemented AI or plan to invest in AI to address business fu­nctions such as customer service, human resources, IT automation, security and recommendations.

Business processes are increasingly being transformed with the help of AI and ML, and it is obvious that increased investments will provide further impetus to the introduction of newer and more cost-effective solutions.

Increased adoption across verticals

AI is being leveraged across verticals based on business requirements. For instance, the BFSI sector largely utilises AI for enhanced operational efficiency, greater in­novation and increased customer satisfaction. Meanwhile, manufacturing orga­nisations leverage AI for predictive maintenance, business risk reduction, revenue increase from new markets/products, greater business resilience, etc.

As per the IDC report, by 2023, at least 35 per cent of companies will leverage AI tools business-wide to enable 50 per cent of use cases across areas such as CX, security, facilities and procurement. These AI tools will be based around natural language processing, machine learning (ML) and deep learning.

Government initiatives

AI adoption in India is at a rise owing to increasing government initiatives in the country. For instance, recently India and Germany agreed to work together with a focus on AI start-ups as well as AI research and its application in sustainability and health care. During a recent meet, the two countries expressed satisfaction on the ongoing science and technology cooperation between them, which is one of the strategic pillars of their bilateral relationship. Further, both countries are now working in frontier areas of science and technology, including electric mobility, cyber-physical systems, quantum technologies, future manufacturing, green hydrogen fuel and deep ocean research. They have already started mapping each other’s strengths in areas such as application of AI in sustainability and healthcare.

In addition, Germany has expressed support for further strengthening bilateral cooperation in emerging science and technology areas.

In another development, in 2021, the Government of India partnered with the US to launch US India Artificial Intelli­ge­nce to strengthen the science and technology relationship between India and the US. Moreover, in 2020, NITI Aayog invited several health-tech start-ups and organisations under the “Empowered Group 6” initiative to leverage their low-cost innovative technologies to combat Covid-19. This included, which uses AI-enabled analysis of chest X-rays to detect Covid-19 lung infections in under a minute, and Mfine, which is an AI-powered online doctor consultation and telemedicine platform.

Use cases of AI across sectors


With the help of AI, the edtech sector is personalising the learning experience of each student. AI tools and devices are also enabling global classrooms, which are accessible to all, irrespective of language or disabilities. For instance, a free Power­Point plug-in, Presentation Trans­la­tor, develops subtitles for lectures in real time. Further, Leverage Edu, a career guidance platform, uses AI to mentor students in their career journeys. The tool helps them receive guidance for college applications and suggests programmes to improve their skills.


AI has made inroads into the logistics sector too, playing a significant role in stre­amlining enterprise operations. By using cognitive automation, enterprises can save time, reduce costs and increase pr­o­ductivity. For managing warehouse operations, AI-based solutions can help collect and analyse key information regar­ding the functioning of key devices and machines, and help with inventory processing. More­over, AI-based self-driving ve­hicles can reduce the opex involved in transportation, thus bringing down the ov­er­all ex­pen­ses in logistics. AI is also being increasingly used by logistics players for predictive demand and network planning. With the help of AI, companies can accurately predict demand and accordingly do capacity planning, thus ensuring better operational management.


AI helps in creating a personalised environment for both patients and healthcare service providers. It is transforming the ap­proach to diagnosis and paving the way for faster and more precise methods of conducting surgeries. Further, the Covid-induced need for touch-free interactions has the potential to improve the clinical uptake of natural language processing, a branch of AI that allows computers to un­derstand spoken remarks. Meanwhile, automated services such as symptom-che­cking chatbots will continue to ease admi­nistrative bottlenecks.


The Indian AI market is at the cusp of growth. The rise of start-ups in the field of AI is driving growth and innovation in the country. In 2020, Indian AI start-ups raised $836.3 million, the largest funding outlay during the past seven years. However, factors such as lack of clarity regarding rules and regulations and the issues of integrity and ethics with AI and ML solutions are hampering the market growth of AI in India. Policy documents and working drafts on AI issued by NITI Aayog recognise ethical and fundamental concerns in the implementation of AI and hint towards a self-regulatory ap­p­roach towards the same in the coming tim­es. Additionally, the policy documents identify ethical challenges in AI while recognising issues such as the “Black Box Pheno­menon”, and the issues of data collection without proper consent, the privacy of personal data, inherent selection bias, risk of profiling and discrimination, and non-transparent nature of certain AI solutions.


According to the latest report by the IDC, India’s AI market will reach $7.8 billion by 2025 growing a compound annual growth rate (CAGR) of 20.2 per cent, from a market value of $3.1 billion in 2020. More­over, the AI services market is set to lead the overall AI market growth in India by 2025 with a CAGR of 35.8 per cent. In addition, the IDC predicts that the Indian AI software market will grow from $2,767.5 million in 2020 to $6,358.8 million in 2025, at a CAGR of 18.1 per cent.

Furthermore, as per the IDC report, by 2023, over 40 per cent of consumer-focused AI decisioning systems in fin­ance, healthcare, government and other regulated sectors will include provisions to explain their analysis and decisions. Moreover, by 2024, 40 per cent of knowledge workers will regularly interact with their own AI-enhanced robot assistant, which will help identify and prioritise tasks, collect information and automate repetitive work.

Industry analysts have opined that if India acts quickly, it can become a leader in building a holistic data utilisation and AI tool, especially as countries emerge from the pandemic and global economic slowdown.