In India, the AI (Artificial Intelligence) market is increasing at an impressive rate of 25-35%. Such strong growth is attracting several investors towards this industry. Due to increased FDI (foreign direct investments) and higher budgetary allocations, it is expected that the AI market will reach $17 billion (Rs. 1.41 lakh crores) by 2027.
This clearly shows that AI-related businesses will see a lot of growth in the future. As an investor, this could be the right time to invest in the AI sector. In this article, let’s check out the latest AI investment trends of 2025 and how you can analyse them.
Major trends for AI investment in 2025
Given the high popularity of AI, this sector is attracting massive investments. Let’s check out some major trends that can ensure AI remains a key area of growth in the coming years.
1. Increased government funding
The Indian government is investing heavily in AI. The Union Budget 2025 has significantly increased funding for AI development under the IndiaAI Mission. This investment will boost AI innovation and research. Let’s understand in detail:
a) Big increase in AI budget
The government has raised the AI budget from Rs. 173 crore last year to Rs. 2,000 crore for 2025-26. This marks a whopping 1056% increase. Please note that more funding means better technology, which increases the competitiveness of new startups.
b) Long-term investment plan
Over the next five years, India plans to spend Rs. 10,370 crore on AI development. Here the aim is to build strong AI capabilities so that India can compete with global tech leaders like the US and China.
c) Building strong AI models
A part of this budget will be used to create foundational AI models and data centres. To support this, the government has already shortlisted 10 companies that will provide 19,000 GPUs (high-speed processors for AI tasks).
d) AI in education
Rs. 500 crore is being spent to set up a Centre of Excellence in AI for education. This will improve learning by using AI for personalised teaching and modern educational tools. The goal is to prepare students and workers for AI-related jobs in the future.
2. Wide sectoral application of AI
AI is being widely used in different industries to improve efficiency by automating tasks. In India, AI is mostly used in:
- IT operations (83%)
- Software development (56%)
- Data quality management (55%)
For your reference, below are some key sectors where AI is making a big impact:
1. Healthcare
AI is improving medical diagnostics and treatment. Most companies are now using AI for intelligent pathology screening. This helps doctors to detect diseases faster.
Moreover, AI tools are providing personalised healthcare by:
- Analysing patient data
- Improving treatments
- Increasing hospital efficiency
This leads to better patient care and lower healthcare costs.
2. Finance
The finance industry is using AI for:
- Early fraud detection
- Providing better customer service (through AI-powered chatbots)
- Reducing loan processing times
Also, AI is automating routine processes, such as KYC verification, by quickly analysing customer details.
3. Retail and e-commerce
AI is helping e-commerce companies by personalising shopping experiences. It allows for smart product recommendations based on customer preferences. AI also helps retailers:
- Predict demand
- Manage inventory
- Set optimal pricing strategies
This increases operational efficiency and makes it more profitable for businesses.
3. Growing investment in GenAI in 2025
Generative AI (GenAI) is expanding rapidly. There has been a 4X increase in GenAI assistant applications and a 4.6X rise in GenAI services startups. This means more companies are now developing AI-based tools and services.
Such growth has been made possible due to a surge in funding in Indian GenAI startups that reached USD 760 million or Rs. 6,308 crore (in the first half of 2024). Let’s see why this segment is showing strong growth:
a) Companies are prioritising AI
Nearly 80% of businesses in India plan to increase AI investments in 2025. They are focusing more on improving technology rather than workforce training.
b) Main reasons for AI investment growth
Executives cite three key reasons for increasing AI investments:
- 29% want to take advantage of new AI advancements
- 23% feel more confident about managing business risks related to AI
- 17% want to stay competitive in the global market
c) High adoption of GenAI in enterprises
Currently, 74% of Indian companies are investing in GenAI and Large Language Models (LLMs). In the financial sector, adoption is even higher at 85%, as AI is being used for fraud detection and automation.
How can you analyse these trends
To make profitable investments in the AI sector, you can analyse these trends in the following manner:
1. Follow government policies and funding
The government is heavily investing in AI and its policy direction will influence AI growth. Thus, you should:
- Read the Union Budget’s AI-related announcements.
- Track government-backed AI initiatives (like IndiaAI Mission) to see which companies benefit.
- Look for companies getting government contracts or subsidies for AI development.
2. Monitor global AI trends and India’s position
To better predict India’s future AI direction, you should:
- Compare India’s AI growth with countries like the US and China.
- See which Indian companies are partnering with global AI firms.
- Track government AI policies in leading AI countries (that’s because India may follow similar paths).
3. Analyse AI investment strategies
AI adoption varies! Some businesses (banks and NBFCs) are fully integrating AI, while others are experimenting. Thus, as an investor, you should:
- Look at M&A (mergers and acquisitions) activities. That’s because big companies acquiring AI startups signal strong AI demand.
- Track partnerships between AI firms and traditional industries
Conclusion
The AI industry in India is growing due to:
- Increased government funding
- Widespread adoption across sectors, like healthcare, online marketplace, and finance.
- Rising investments in GenAI
As an investor, to make profitable investments, you should track policy changes and global AI trends. Also, you should monitor mergers, acquisitions, and partnerships to identify lucrative opportunities.
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