Economic Survey 2026: India should prioritise practical AI use cases over mega-models

The Economic Survey 2026, released on January 29, said India’s AI strength lies in application-led innovation, urging the country to focus on practical use cases rather than racing to build “frontier-scale” mega-models.

The Survey warned that the riskiest path for India would be the “passive consumption” of foreign AI platforms. Instead, it said the country should build AI solutions from the ground up, anchored in India’s digital public infrastructure (DPI) such as Aadhaar, UPI, DigiLocker, and others.

“The country’s strengths lie in application-led innovation, the productive use of domestic data, human capital depth, and the ability of public institutions to coordinate distributed efforts,” the Economic Survey 2026 noted.

It added: “A bottom-up strategy anchored in open and interoperable systems, sector-specific models, and shared physical and digital infrastructure offers a more credible pathway to value creation than a narrow pursuit of scale for its own sake.”

The survey said India should prioritise sector-specific models in areas such as healthcare, education, and manufacturing, where AI can deliver immediate returns on investment.

It also highlighted the need for “graduated regulation” as AI capabilities are increasingly deployed across critical sectors, noting that “regulation, data governance and safety will have to evolve in parallel with deployment, not in its aftermath.”

With the Union Budget 2026–27 just days away, the government is expected to announce reforms and policies to support this application-first AI vision.