According to Business Insider, Anthropic will open its first India office in Bengaluru early next year after CEO Dario Amodei met with Prime Minister Narendra Modi to discuss AI’s future for “over a billion people.” OpenAI plans to open its India office by year-end and is offering a free year of ChatGPT to all Indian users starting November, while Perplexity gave away free Pro plans to 360 million Airtel customers in July. India now has over 900 million internet users, making it OpenAI’s fastest-growing market outside the US and Anthropic’s second-largest globally for Claude usage. This massive expansion follows Alphabet’s $15 billion data center investment and comes as India launches its own $1.2 billion IndiaAI Mission to build domestic AI capabilities. The stage is set for a high-stakes battle between foreign AI ambitions and local development.
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The Data Extraction Paradigm Returns
What we’re witnessing is the evolution of a familiar pattern that began with internet giants a decade ago. Western companies historically viewed emerging markets as sources of user growth and data rather than genuine innovation partners. The concern expressed by Bengaluru developer Saurav Agarwal – that this represents “a lot of taking and not enough giving” – reflects a deeper structural issue in global tech relationships. When companies prioritize policy partnerships and business deals over local engineering hiring, they reinforce what development economists call the “resource curse” of the digital age: providing raw data and users while importing finished AI products.
India’s Unprecedented Strategic Position
Unlike previous tech waves, India enters this AI revolution from a position of unprecedented strength. The country has developed world-class startup talent through companies like Flipkart and has demonstrated its ability to build dominant local platforms like UPI, which processes more transactions than Visa globally. This isn’t the “next billion users” market – it’s potentially the first billion users market for AI, meaning the patterns established here could define global AI adoption. The critical difference from China’s walled garden approach is that India represents the only major open internet market where Western AI companies can achieve true scale without local competition.
The Governance Imperative
The risks extend beyond economic concerns to fundamental societal stability. We’ve already seen how WhatsApp-fueled mob violence and platform manipulation can have deadly consequences. With AI systems like OpenAI‘s GPT-5 showing 76% caste bias in testing, the stakes are exponentially higher. These aren’t mere technical bugs – they’re amplifiers of deep-seated social divisions that could destabilize communities at unprecedented scale. The absence of strong AI governance frameworks creates a regulatory vacuum that foreign companies may exploit, repeating the “move fast and break things” mentality that proved disastrous in social media’s expansion.
The Local Innovation Response
India’s $1.2 billion IndiaAI Mission represents one of the most ambitious national AI development programs globally, targeting 10,000 GPUs for researchers and models trained across 22 official languages. Projects like Sarvam-1 and Project Indus demonstrate that Indian technologists understand their market’s linguistic and cultural complexity far better than Silicon Valley ever could. The question isn’t whether India can build competitive AI – it’s whether foreign investment will accelerate local capability development or simply create dependency on imported technology. The UPI success story proves India can leapfrog Western models when it controls its own infrastructure.
The Talent Drain Dilemma
When foreign AI giants establish beachheads in India, they face a critical choice: will they create high-value research and development roles or primarily focus on sales, policy, and localization? The concern that companies are hiring for “legal, partnerships, and policy” rather than core engineering reflects a broader pattern in global tech expansion. True wealth creation comes from moving up the value chain from services to innovation leadership. If foreign AI companies treat India as merely a market rather than an innovation hub, they risk reinforcing the very brain drain they claim to be addressing.
A Path Beyond Extraction
The most promising outcome would see foreign AI companies partnering with local institutions to build capacity rather than simply extract value. This means establishing genuine R&D centers, contributing to India’s computing infrastructure through projects like the planned Stargate data center, and developing AI that addresses local challenges from agriculture to healthcare. The alternative – treating India as a digital colony for user acquisition and data collection – would represent a massive missed opportunity for both global AI development and India’s technological sovereignty. The next six months will reveal whether this gold rush becomes a genuine partnership or merely the latest chapter in digital colonialism.
