📰Big Tech’s AI Arms Race in India Kicks Off | Daily India Briefing

Today, we break down the Big Tech AI arms race that kicked off in India yesterday, with Microsoft and Amazon committing $50 billion in investment within 24 hours.

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Macro

• The rupee hit a record low beyond 90 per dollar. Traders said the RBI stepped in to slow the decline.

• The Reserve Bank of India scrapped all limits on banks opening and operating cash credit accounts and also relaxed rules for current and overdraft accounts, including allowing unrestricted current accounts for borrowers with banking exposure under 100 million rupees. The regulator said the changes, part of its updated transaction account framework, are meant to give banks more flexibility after industry feedback on the draft rules.

• Analysts increased long bets on most Asian currencies amid stronger growth prospects and a softer dollar, while bearish positions on the Indian rupee jumped to a 10-month high, as per a Reuters poll.

Equities

• Indian stocks rebounded on Thursday, with the Nifty 50 up 0.55 percent and the Sensex up 0.51 percent, after the Fed’s 25-basis-point rate cut ended a three-day, 1.6 percent slide—even as the rupee hit a record low amid worries over the stalled U.S. trade deal.

Alts

• Mexico’s move to lift car import tariffs to 50 percent will hit roughly $1 billion of Indian vehicle exports, hitting players like Volkswagen, Hyundai, Nissan and Maruti Suzuki. The hike, driven by domestic protection goals and U.S. pressure on Mexico’s China ties, threatens India’s third-largest auto export market and may force manufacturers to rethink Mexico-focused production strategies.

• Prudential sold a 4.5 percent stake in ICICI Prudential Asset Management for 49 billion rupees (about $545 million) ahead of the fund manager’s $1.2 billion IPO launching Friday. Only Prudential will offload shares in the listing, with proceeds from the private sale and IPO planned to be returned to shareholders pending approvals.

Policy

• Modi said he spoke with Trump for the third time since Washington doubled tariffs on Indian goods to as high as 50 percent, a move that has hit exports such as textiles, chemicals and shrimp and contributed to a nearly 9 percent drop in shipments to $6.31 billion in October. Modi described the conversation as “warm,” no progress on trade talks was announced.

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Big Tech’s AI Arms Race in India Begins

Microsoft, Amazon, and Google have pledged to spend a total of $67.5 billion in building out India’s AI infrastructure over the next five years, with $50 billion being pledged in just the last 24 hours. The total figure far dwarfs the India’s government’s ambitious AI initiative to spend $1 billion to foster homegrown AI technology, and Reliance and Tata’s own multi-billion dollar AI commitments.

Yesterday, Amazon announced plans to invest $35 billion across its businesses in India by 2030, which they estimate will support 3.8 million new jobs. The company’s press release argues this is an essential step to quadruple the country’s ecommerce exports to over $80 billion. Amazon’s announcement came just 24 hours after Microsoft’s commitment to invest $17.5 billion to build out its AI capabilities in the country.

No major tech company wants to be caught flatfooted in India — the country is home to millions of engineers and data scientists that serve as a powerful jet fuel for each company’s AI initiatives. It may sound like plenty of engineers, but in a market serving millions of businesses and 1.4 billion people, even that pool triggers fierce competition for talent among Indian and international tech companies. According to Stanford’s global AI rankings, India ranks the highest of any nation in relative AI skill penetration across the workforce. Stanford ranks the country third overall for“AI excellence,” behind the U.S. and China.

“India combines a huge digital user base, rapidly growing cloud and AI demand, and a high-talent IT ecosystem that can build and consume AI at scale,” Tarun Pathak, research Director at Counterpoint Research told CNBC.

The best part for India? While the U.S. has 50 percent tariffs on Indian imports, you can’t tariff software.

See you tomorrow.

Written by Yash Tibrewal. Edited by Shreyas Sinha.

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