India Inc’s $150 billion capex dwarfed by Microsoft-sized AI spend: Jayant Sinha flags investment gap

A single global technology company can now spend more on data centres than India's entire corporate sector invests annually, highlighting the scale of capital India will need to mobilise if it wants to compete in artificial intelligence and eventually become a $30 trillion economy, former MoS Finance Jayant Sinha said while speaking at the Business Today's India@100 event.

Pointing to the widening investment gap in AI infrastructure, Jayant Sinha, Former Chair of the Standing Committee for Finance and President of Everstone Group said annual corporate capital expenditure in India stands at about $150 billion. In comparison, companies such as Microsoft are deploying enormous sums into data centres as the global AI investment race accelerates.

“Do you know what corporate capex is in India annually? It's about $150 billion. So, one company like a Microsoft is investing more in data centers than in the entire corporate sector in India. If we don't keep up we'll find it very difficult to be able to be competitive,” he added.

The comparison, Sinha said, illustrates the investment challenge confronting India as artificial intelligence reshapes global competitiveness. He estimated annual investment in data centres and AI in the US at about $1 trillion, with some of the world's biggest technology companies making massive individual commitments.

For India, Sinha argued, incremental investment will not be enough. Data-centre investment itself needs to rise substantially if the country wants to remain competitive and build an economy capable of reaching $30 trillion by 2047.

“We get the investment in data centers not for $5 billion or $10 billion a year but $50 billion a year, that's the scale of what we have to do to be get to a $30 trillion economy,” he explained.

AI investment becomes a competitiveness test 

Sinha placed AI alongside climate technologies and the China-plus-one manufacturing opportunity as major global shifts India needs to seize.

The technological frontier, he said, is constantly moving as countries and companies invest in AI, quantum technologies, space and biosciences. India cannot afford to treat competitiveness as a fixed target when the US and China are continuously investing and innovating.

Sinha cited the scale of investment in the US technology sector to make the case that India will have to dramatically expand capital formation to remain on that frontier.

The country, he said, must undertake three transformations — in people, technology and energy — as part of what he described as a “green frontier development model”.

“We already well underway with our digital public infrastructure and so on. But we have a whole host of deep technologies coming our way which are of course AI, quantum, space, biosciences, all of these,” he added.

$400 billion more investment needed 

The scale of India's AI challenge feeds into a much bigger investment gap. Sinha compared today's India with China when the latter's economy was roughly the same size. India is currently investing about 30-31% of GDP, while China was investing around 40-42% when its GDP was about $4 trillion, he said.

“So to be able to grow as fast as China did which was 8 or 9 or 10% at that time when they had their demographic surge we have to be investing 10% more than we are investing.”

For an economy of India's size, that additional 10 percentage points would translate into roughly $400 billion in investment annually, according to Sinha.

India needs that investment if it wants to move beyond its current growth trajectory and achieve the rates necessary to become a $30 trillion economy, he said.

6-7% growth won't be enough 

Sinha said India has demonstrated resilience through repeated global disruptions, including the global financial crisis, the Covid pandemic and geopolitical conflicts. The economy is still expanding at around 6-7% annually and its macroeconomic parameters remain robust, he said.

But India's demographic opportunity means it should aim considerably higher. “The challenge again as I said is not to grow at 6 or 7%. The challenge for us as everybody says is while we have the demographic advantage to grow at 8 or 9 or 10% and get to the 30 trillion. That's the real challenge for us.”

The demographic window adds urgency. India's large young population needs productive employment today, while the same cohort will be older in another two to three decades.

“We have a lot of young people that we have to make very very productive, highly skilled, fit them into a 21st century economy and in 20 or 25 years these very same young people will be older people.”

Higher investment, Sinha said, is central to generating the jobs needed to absorb this workforce.

Despite putting India's additional investment requirement at about $400 billion annually, Sinha argued that the availability of money itself is not the fundamental constraint.

Global capital will flow to India if investors can earn sufficiently attractive returns, he said. “It's not about capital. There is more than enough capital in the world. It's actually about returns.”

Watch the full conversation here: