Source: The post US Restrictions on AI Chips and Its Impact on India has been created, based on the article “New restrictions on AI chips into India” published in “Business Standard” on 20th January 2025
UPSC Syllabus Topic: GS Paper3- Science and Technology- Awareness in the fields of IT, Space, Computers, robotics, nano-technology, bio-technology and issues relating to intellectual property rights.
Context: The article explains US restrictions on exporting high-end AI chips, their limited impact on India’s IT services exports, and India’s focus on leveraging global AI developments. It highlights India’s role in services, not hardware, and domestic AI application strategies.
For detailed information on US Proposal Restricting Chips Impacting India read this article here
What are the US restrictions on AI chip exports?
The US has imposed restrictions on exporting advanced AI chips, treating them like defense equipment. These restrictions limit exports for AI model training but allow Indian firms to import up to 1,700 Nvidia H100 chips per firm annually. Domestic needs for AI applications remain unaffected.
How do the restrictions impact India?
The US restrictions on AI chip exports have a limited impact on India due to its strong services exports and available alternatives for domestic AI applications:
- Resilient IT Services Growth: IT services exports grew at 9.17% annually (doubling every 7.5 years), and “other business services” grew at 11.86% annually (doubling every 5.8 years). Services exports totaled $341 billion in 2023-24 and are projected to double in a decade.
- Domestic AI Applications Unaffected: Indian firms have three pathways to manage AI needs:
- Renting server capacity from cloud vendors abroad continues without restrictions.
- Firms can import up to 1,700 Nvidia H100 chips annually, enough for most Indian firms.
- Cheaper chips, like Nvidia H20, remain unrestricted for AI inference tasks.
- Support for Data Centers: Domestic players, such as Tata and Jio, can import up to 100,000 chips annually, which meets the current needs for large-scale AI model training. This limit is set to increase to 320,000 by 2027. This capacity is significant, especially when compared to the 50,000 chips used in the largest US computers for nuclear weapon development.
- These points highlight that India’s services-driven growth remains unaffected while domestic AI applications have sufficient flexibility.
What is the role of the Indian government in AI technology?
- The Indian government’s role involves regulating and facilitating the AI technology sector, focusing on preventing high-tech exports to sensitive countries like Russia, China, and Iran.
- Successful regulation helps more Indian firms qualify for “National Verified End User” (NVEU) status, easing some restrictions.
How can US firms contribute to AI development in India?
- US firms that obtain “Universal Verified End User” (UVEU) status can transfer a significant amount of their AI chip inventory to India—up to 7% of their annual global count.
- This policy could potentially bring more than 7,000 AI chips per year to India from each qualifying firm, enhancing local knowledge and infrastructure.
Question for practice:
Examine how the US restrictions on exporting advanced AI chips impact India’s IT services exports and domestic AI applications.
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