From Innovation to Regulation: How Global Powerhouses are Approaching the AI Revolution

Modern times call for modern solutions. Enter: Artificial Intelligence. Whether you want it or not – AI is being rolled-out for various functions in a wide range of industries. From healthcare, to automotive, to retail, education, and finance and hospitality – name your pick. But as we witness an AI explosion all around us, it is still fairly an unchartered landscape for policymakers.

Instead of a unified approach, different governments are traversing through this path with unique approaches to serve their national interests, juggling regulation with innovation.

The attitude to the AI wave has differed based on factors like the infrastructural support and cultural outlook towards technology and privacy, investments in Research and Development (R&D). But regulatory trends reflect that after the initial euphoria around AI’s potential, the focus is now on responsible AI and optimising the real returns from the outsized investment in this sector.

The difference in national policies will play an important role in determining the degree of integration of AI into a country’s economic growth story.

Winners and Losers

1. EU’s Stringent Policy with a Catch
   Let’s start with the European Union. It passed the first of its kind legislation – the AI Act that is intended at safeguarding rights and democracy from potential risks posed by AI technologies, while also fostering and promoting innovation in the AI sector.
   
   Compared to other regions, European countries have traditionally had a greater emphasis on ethical considerations of technology, which is also evident in the EU’s General Data Protection Regulation, 2018.
   
   By all measures, the European Union (EU) has emerged as a trailblazer with its stringent, risk-based AI regulations. But the flipside is a lower share of private investment into R&D amid a global race for AI innovation. Even as a third of European firms have adopted AI in some form, the US and China are outpacing EU countries when it comes to investments in R&D.
   
   As per data available in the public domain, the US is leading private investment in AI with €62.5 billion in 2023, followed by €7.3 billion in China. Compare that to the EU and the United Kingdom (UK) which together attracted €9 billion worth of private investment. A leader in automation, Germany has pushed for sectoral transition to AI through Industrie 4.0, but overall, most EU countries have faced the challenge of lack of skilled AI talent.
2. The US Betting Big on Innovation, at a Cost
   It goes without saying that unlike the EU, the United States being home to tech giants like Google, Amazon, Meta, IBM, and Microsoft has a more market-driven approach to AI. With one of the most advanced tech infrastructures in the world, the AI adoption rate has been fastest here, spreading across sectors – banking, healthcare, retail and manufacturing.
   
   On the policy side of things, currently there is no comprehensive law to govern AI in the country. Instead, it is regulating AI based on existing federal laws.
   
   Furthermore, owing to its federal structure, AI regulations for the US have been decentralized, with the country betting big on innovation, but each state giving a fragmented response to its ethical challenges. Consider the recent development from the state of California – the home of Big Tech, where Governor Gavin Newsom vetoed SB 1047, a bill that would have regulated the development of AI. Expectedly, many in the Silicon Valley including OpenAI believed such a bill would stifle innovation. Although interestingly, some of these same companies are trying to align themselves with the EU’s AI Act, Meta being the outlier.
   
   But regulations taking a backseat has reaped more results for the country in terms of innovation and advancement. Case in point, the investment figures mentioned earlier. Here, the National AI Initiatives Act 2020 can serve as a blueprint for the rest of world on driving R&D in this sector.
3. China's AI Paradox
   Taking a different tangent entirely, China is playing a high-stakes game with AI. Unlike other global leaders where private sector has sparked innovation and adoption, the country’s AI revolution has been fuelled by their government which views AI as a strategic technology.
   
   Since 2016, the nation has crafted a complex web of cybersecurity and data protection laws, positioning itself as a cyber superpower. The Chinese government has moved through three distinct phases of AI regulation: from industry self-regulation to issuing national standards, and now, to imposing strict rules on specific technologies. The Next Generation AI Development Plan introduced in 2017, aims to make China world’s leading AI innovation centre by 2030.
   
   
   
   To that end, the government has also drafted AI legislations that are going to be favourable to the rapid development of AI, if passed. This has enabled their domestic AI systems to train on cutting-edge technology like facial recognition and natural language processing.
   
   The country has also invested heavily in R&D, talent development and strategic partnerships with the private sector.
   
   But there is something peculiar about China’s stance towards AI. On the one hand, unlike the US, it has formulated and implemented regulations to govern deepfake technology, chatbots and algorithms to ensure responsible AI development, on the other hand, China’s approach to AI is mired in privacy concerns, over invasive data-collection apps and the use of AI for surveillance.
4. India: Walking the Tightrope Between Innovation and Regulation
   As for India, it faces the challenge of balancing its urgent need for job creation with its ambition to becoming a global AI powerhouse. While the country’s AI integration is yet to pick a direction, the conversation around responsible AI has already begun.
   For starters, the National Strategy for AI 2018 emphasizes on the need for ethical integration of AI. It proposes for a national AI ethics council to regulate ethical standards around AI and their societal impact. On that note, the 2024 Economic Survey also highlighted the broader risks of unchecked AI use, calling for a responsible approach that considers the potential social and economic upheaval.
   Furthermore, India has launched an ambitious AI mission, backed by over ₹10,000 crores in funding, positioning itself as a key player alongside the US and China. With initiatives like AI for All (2020) and National AI Portal, making AI available to all sections of the society is a part of the national strategy from the conceptual stages. In terms of AI-enabled infrastructure, although India lags China, US and EU, but Government initiatives like IndiaAI Mission aim to setup AI innovation centres, testing facilities, skill development labs and even AI startup financing mechanisms.
   
   But going forward, it will be crucial for India to decide it’s focus of AI innovation and stance on ethical deployment of the technology. Given our population dividend, is India going to be a global supplier of AI talent, in a repeat of the IT Services growth model? Are we going to be the powerhouse of AI Language Models – both Large and Small? Are we going to be the pioneers in AI for inclusive development? The clock is ticking, and India’s AI strategy needs to be sharp, clear, and decisive if it wants to stake its claim on the global stage.