Sep 17: India's AI Ambition Faces an AI Data Hurdle

Forget Mumbai’s glamour or Gurgaon’s swagger, Pune is making news for being India’s Vaastu capital. While cities across India are chasing gold-priced square feet, Pune’s homes are simply facing the right direction. 56% of homes currently listed for sale in the city are described as Vaastu-compliant in a recent report. Whoever went around these cities checking which house is facing east needs a raise.

Now, let’s get into the Dispatch! 🚀

Today’s reading time is 7 mins.

The Indian stock market indices rallied on Tuesday, with the Sensex closing nearly 595 points higher. The surge was primarily driven by investor optimism over ongoing trade talks between India and the United States.

The Import Challenge: India’s ambitious semiconductor and electronics manufacturing drive is running into an unexpected hurdle - restricted access to critical raw materials. Industry executives say that essential inputs like gold wire, solder paste, epoxy compounds, palladium-coated wires and lead frames are difficult to procure due to licensing restrictions from the Directorate General of Foreign Trade (DGFT) and high customs duties. These restrictions, they argue, are impeding the country’s cost competitiveness and slowing down the momentum needed to attract global supply chain investments.

The Industry’s Proposal: To address this, semiconductor and electronics manufacturers have proposed a 10-year, zero-duty import regime under the Import of Goods at Concessional Rate of Duty (IGCR) framework. This, they believe, would not only enhance cost efficiency but also reduce India’s dependency on external supply chains and encourage multinational suppliers to invest locally. The Electronics Industries Association of India (ELCINA) has identified 25 such critical materials that are often available only through a handful of globally accredited distributors. This makes sourcing especially difficult for smaller firms without deep networks or bargaining power.

Bottlenecks In Procurement: Among the most pressing challenges are specialised materials like gold-based solder alloys, silver epoxy syringes, solder paste, palladium and gold-coated copper wires. These are indispensable for advanced packaging plants (ATMP and OSAT) and printed circuit board makers, yet require special licences for import. 

Quality Control Orders Add Pressure: The hurdles may soon get steeper. With new quality control orders (QCOs) on steel and copper imports taking effect from October, the industry expects further complications in accessing high-grade, specialised materials. Semiconductors require consumables of extremely high purity, often developed through years of research and closely held by a few global players.

Why The Government Is Cautious: Officials argue that strict licensing rules exist for a reason. Many of these materials, especially those with high silver content, are vulnerable to misuse, as precious metals can be extracted from them. For instance, any material with more than 2% silver currently requires a licence. Companies are now working with the government by submitting end-use certificates to prove their requirements are strictly for semiconductor manufacturing. Industry insiders say that as India starts importing many of these materials for the first time, clarity over their usage will eventually make it easier to regulate flows without stifling industry needs.  

The Road Ahead: The consensus across the sector is: if India is to realise its semiconductor ambitions, policy flexibility on raw materials is non-negotiable. A zero-duty import window, faster licence approvals, and a framework for global suppliers to set up shop in India could help bridge the gap. For now, though, shiny new fabs face a sobering reality - you can’t build chips without the glue, wires, and gases that hold them together.

A Big Push From The Government: Since the start of the year, the Indian government has gone all-in on artificial intelligence. The IndiaAI mission, backed by nearly ₹10,000 crore, promises subsidies for GPUs, incentives for indigenous AI models, and support for startups building in the space. The initiative has already selected early players such as SarvamAI, Soket Labs, and Gnani.ai, with more including Tech Mahindra and Fractal expected to be announced soon. The mission comes at a moment when India is racing to develop its own Indic language models, seen as vital for unlocking the country’s vast digital population. There is, however, one big challenge that money alone cannot fix: a severe shortage of high-quality language data. 

The Data Drought: For AI models to work well, they need massive, diverse datasets. But for Indian languages, those datasets are fragmented, inconsistent, or simply unavailable. Startups say that without this backbone, building truly competitive models is nearly impossible. Adding to the challenge, bots that scrape online content to train models, are increasingly being blocked to protect creators’ work. While this is a welcome step for intellectual property, it makes collecting up-to-date information even harder for young firms. 

Global Competition Heats Up: Even as Indian startups struggle with these challenges, global giants like OpenAI and Google’s Gemini are steadily improving their capabilities in Indic languages. That raises the stakes for local players. The government has opened up Doordarshan archives to provide culturally rich training material, but the scale of the task remains daunting. Without faster access to licensed data and a clearer framework for content usage, India’s AI mission risks falling behind despite the funding.

JLR Production Halted: Tata-owned Jaguar Land Rover (JLR) has extended its production halt until September 24 due to a cyberattack. A hacker group called "Scattered Lapsus$ Hunters" claimed responsibility, and the shutdown is estimated to be costing the company approximately £50 million a week, with over 1,000 cars typically built daily. The attack has also created supply-chain stress and is causing delays for UK garages needing parts.

India-US Tariff Roadblock: A report by the Global Trade Research Initiative (GTRI) suggests a breakthrough in the India-US trade deal is unlikely unless Washington drops the extra 25% tariff on Indian goods, which is tied to India’s Russian oil purchases. This adds to an earlier 25% levy, bringing the total duty to 50%.

Ola's Production Milestone: Ola Electric has reached a significant milestone by producing 1 million vehicles from its Futurefactory in Krishnagiri, Tamil Nadu, in under four years. The company's growth is largely attributed to its S1 electric scooter series and the newly launched Roadster X electric motorcycles.

Gaming Industry Job Cuts: India's blanket ban on real-money gaming has led to nearly 2,000 layoffs across major firms, including MPL, Head Digital Works, Games24x7, Zupee, and PokerBaazi. According to staffing firm Xpheno, more cuts are expected from the top seven firms, which employ a total of around 6,000 people.

Ambani’s $200 Billion Retail Play: Mukesh Ambani is reportedly preparing to take Reliance Retail public in 2027, with a target valuation of nearly $200 billion. This move is expected to follow the planned IPO of Reliance Jio in 2026. To prepare for the listing, Reliance is streamlining its retail operations by demerging its consumer goods unit and closing underperforming stores to improve margins.

Shipping Push: India is allocating ₹5,000 crore in low-interest loans for shipbuilding and shipping projects. This is part of a larger plan to establish a Maritime Development Fund (MDF) with a corpus of ₹25,000 crore. The fund will be a public-private partnership, with up to 49% of the contribution coming from the government.

Tyre Industry Growth: India's domestic tyre industry is projected to experience a massive 12-fold revenue growth, reaching ₹13 lakh crore by 2047, according to a joint report by the Automotive Tyre Manufacturers Association (ATMA) and PwC India. This surge is fuelled by strong domestic demand from the original equipment manufacturer (OEM) sector, the replacement tyre market, and a significant expansion of vehicle exports.