How far is India from creating its own DeepSeek?

This report is from this week’s CNBC’s “Inside India” newsletter which brings you timely, insightful news and market commentary on the emerging powerhouse and the big businesses behind its meteoric rise. Like what you see? You can subscribe here.

China rocked markets earlier this year when its homegrown startup DeepSeek revealed a cheaper and more efficient artificial intelligence model.

With India’s growth story and tech-savvy population increasingly getting the spotlight, how far is the country from churning out its own OpenAI or Anthropic at a lower cost?

We sat down with Kunal Bahl, a well-known entrepreneur and investor. He co-founded venture capital firm Titan Capital and is best known for founding Indian unicorn Snapdeal, a popular online marketplace. He’s also a judge on Shark Tank India.

“Given India’s success in building, deploying and scaling public digital infrastructure … the emergence of an Indian DeepSeek will likely be via a private-public partnership over the next 4-5 years,” Bahl said.

Bahl highlighted some initiatives that could help India build its own large language models with a global appeal.

First, chip manufacturing where India’s efforts are picking up steam.

India’s Commerce Secretary Piyush Goyal told me last October that India is on pace to fabricate its first chip in two years. Separately, we reported earlier this year that Reliance Industries is in the process of building what CEO Mukesh Ambani hopes will be the world’s largest data center in Gujarat.

India’s push to manufacturing and designing cutting edge chips is no easy feat. Just look at the challenges Intel is having in building and producing AI chips in the U.S.

However, India has drawn support from U.S. semiconductors. Micron and AMD are among the U.S. chip companies investing in the country. Nvidia CEO Jensen Huang visited Mumbai in 2024, during which he announced a partnership with Reliance Industries on AI research and development. Huang also promised Reliance access to Nvidia’s latest Blackwell chip.

“These partnerships recognize the important role India will play in the global ecosystem and seek to seize the first-mover advantage by aligning with strong domestic conglomerates,” said Bahl.

Building more chips domestically may be a way to limit the impact of U.S. restrictions on chip exports.

Days before former President Joe Biden departed, he implemented the diffusion rule, which could restrict not just China but several countries from buying high-performance graphic processing units from the U.S. — including India. That rule is set to go into effect this spring. President Donald Trump has the power to reverse it but has not indicated whether he will do so.

In regard to AI, Bahl added that the innovation may come from the large Indian conglomerates like Reliance and Tata that are building their own multimodal LLMs for industry-specific uses. Reliance Jio, Tata Electronics, Adani Group, TCS and Infosys are among the heavyweights in India that Bahl said are quickly becoming India’s hyperscalers.

With China’s market closed off, U.S. companies have set their eyes on helping build out India’s AI ecosystem. OpenAI founder and CEO Sam Altman was in India in early February when he met with IT Minister Ashwini Vaishnaw. Vaishnaw posted on X that the two discussed OpenAI’s interest in collaborating on India’s goal of “creating the entire AI stack — GPUs, model, and apps.” Altman shared that India is currently OpenAI’s second-largest market in terms of users.

Bahl thinks government programs like “India AI mission” that is allocating 103 billion rupees ($1.2 billion) over five years to strengthen the country’s AI capabilities will also play a pivotal role.

He acknowledged that while India’s AI funding is growing, “it is still much lower than the US and China.”

Bernstein’s Head of India Research Venugopal Garre is more cautious. He said India’s lack of investment in homegrown technology makes it less likely to survive the AI battle.

“Building deep tech capabilities hasn’t been a priority [for India], as products of US tech giants, now being led by several Indian CEOs — have been readily available. This is in sharp contrast to China, which has instead created rivals to these firms in every area from micro-blogging to EVs to AI models. India didn’t take the ‘ban foreign; develop own’ approach in the internet age, and it’s too late now,” Garre said.

To be sure, being early doesn’t always guarantee leadership.

“AI models are still in their infancy and it’s still a blue ocean out there. It’s similar to the search engine wars in the early 90s and Google, a late entrant, dominated the market,” Neil Shah, Partner & Co-Founder at Counterpoint Research told CNBC.

The other risk, experts say, is AI displacing jobs in India’s technology sector. Unemployment remains high in the country and adding more productivity tools like AI could risk exacerbating India’s weak labor market, said Akhil Gupta, former head of Blackstone India to CNBC.

India’s economic backdrop and young workforce should position the country to be a leader in disruptive technologies, but industry experts do agree that if the emerging market doesn’t divert enough time, resources and talent towards figuring out its role in the AI landscape, it may become a victim to it.

“India is far, far behind in developing its own version of DeepSeek, but what I can tell you from speaking to a number of executives is that India has woken up to the challenge and is inspired by China’s success,” added Gupta.

We’ll be watching and waiting.

The Indian government approves a new electronics manufacturing scheme. The initiative, which is backed by ₹22,919 crore ($2.67 billion) worth of funds, was approved by the Union Cabinet on Friday and aims to build self-sufficiency in the country’s electronics manufacturing sector.

The Reserve Bank of India speeds up open market operations. During its fiscal year 2025, India’s central bank purchased Government of India securities that amounted to a four-year high. Its move emphasizes the importance of managing liquidity in the financial system amid slowing economic growth domestically and an uncertain international environment.

Tariff cuts as part of trade concessions to the U.S. Beginning in January, India has been reducing the levies it imposes on U.S. imports, such as motorcycles, whiskey and ethernet switches. More significantly, the South Asian nation’s Equalisation Levy, which taxes digital services offered by non-resident companies, was abolished.

India’s luxury sector is booming. Currently valued at $8 billion, the luxury retail market is forecast to grow an explosive 75% and be worth $14 billion by 2032. Factors driving this surge include growing high-net-worth individuals and brands tailoring their offerings to suit Indian tastes.

Singapore’s Temasek enters a deal with Haldirams. Under the agreement, Singapore’s state-owned investment fund will acquire an equity stake in Haldirams, the Indian confectionary company announced Sunday. The deal with support Haldiram’s expansion overseas and is expected to close soon.

Indian stocks were in negative territory Thursday following U.S. President Donald Trump’s announcement of 26% tariffs on the country’s exports to the U.S. The benchmark Nifty 50 was down 0.17% while the broader BSE Sensex index had fallen 0.32% as at 11:55 a.m. local time.

Both indexes have declined since the start of the year, with the Nifty 50 down 1.56% and the BSE Sensex 2.25% lower.

The benchmark 10-year Indian government bond yield edged up slightly to 6.490%.

On CNBC TV this week, Vivian Thurston, portfolio manager at William Blair, noted that India has one of the highest trade surpluses with the U.S. However, India’s exports to the U.S. only account for 2%-3% of the country’s gross domestic product, so the impact of tariffs on economic growth will not be substantial, Thurston said.

The Reserve Bank of India will conclude its Monetary Policy Meeting on Wednesday, when it is expected to lower interest rates. The U.S. and China consumer price index will be out the next day, giving investors insight into where rates are headed in those countries.

April 4: U.S. nonfarm payrolls for March, Federal Reserve Chair Jerome Powell speech, India HSBC composite purchasing managers index for March, final reading

April 9: India interest rate decision, Japan consumer confidence for March

April 10: U.S. consumer price index for March, U.S. Federal Open Markets Committee minutes for March, China consumer and producer price indexes for March, Japan producer price index for March