India’s GenAI startup ecosystem is growing rapidly, with over 890 startups—nearly four times more than last year. There is also a sharp rise in patent filings. However, a new Nasscom report highlights critical challenges. These include a lack of funding, high computing costs, and limited access to talent.

While funding rose 30% year-over-year to $990 million in H1 2025, most capital remains at an early stage. Furthermore, India still lags behind its global peers. Infrastructure constraints and a risk-averse investor mindset are slowing growth.

To survive, startups are focusing on specialised AI for sectors like BFSI, healthcare, and legal, where compliance and trust matter. Agentic AI is also gaining traction, reshaping workflows through the use of automation and orchestration tools.

Founders now see infrastructure costs as a bigger barrier than talent shortages. Regulatory concerns and IP protection are also stalling partnerships and ecosystem maturity.

Nasscom calls for a national strategy with co-funding models, tax breaks, and subsidised AI compute infrastructure. They also recommend initiatives like Bhashini to support local languages. With coordinated action, India can lead the way in trusted, inclusive AI for emerging markets.

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