India's Ministry of Electronics and Information Technology launched a continuous empanelment process for AI compute providers. While seemingly beneficial, this process creates challenges due to a lowest-bidding system leading to compromised service quality and minimal room for R&D investment. This system may not reflect actual market demand.
The IndiaAI compute mission's bidding process incentivizes vendors to drastically undercut market prices, potentially compromising service quality. A significant portion of the demand for high-end chips comes from outside India, suggesting limitations in domestic market size. Additionally, the application process for users is complex, involving bureaucratic hurdles and stringent qualification criteria which hinder innovation.
To create a sustainable market, the focus should shift from solely price-based competition to solutions that meet consumer needs. The significant budget allocation might remain underutilized if demand for subsidized projects is insufficient. India's current compute capacity lags behind global leaders, indicating a focus on addressing specific Indian use cases.
Government intervention should allow market flexibility and agility to adapt to future technological advancements and ensure a smooth transition once the IndiaAI mission concludes.