India must adopt frugal innovation in AI like DeepSeek: Mohandas Pai

India cannot afford to put billions of dollars annually into AI research and development (R&D) and it should rather focus on cost-effective ways to scale AI advancements, former Infosys CFO Mohandas Pai said while citing the example of China’s DeepSeek.

 

Pai, chairman at Aarin Capital, was speaking at the TiEcon Mumbai 2025 event.

 

“We can’t put billions of dollars in R&D every single year because we don’t have that kind of money. What DeepSeek did is very unique. They brought down the computing requirement by 75 per cent,” he added.

 

Pai highlighted that Indian companies should focus on developing vertical large language models (LLMs) for domains like financial services, healthcare, and high-tech manufacturing, rather than competing with general-purpose horizontal LLMs like ChatGPT or DeepSeek. He believes this approach could position India as a dominant digital power in the coming decade.

 

 

As AI takes over routine tasks and streamlines workflows, innovation cycles will accelerate, Pai noted.

 

“Greater discoveries and innovation will happen faster. Innovation cycles will come down because innovation includes search, reasoning, and the creation of models, which can be done by AI,” he explained.

 

Pai suggested that India prioritise five to six areas of technology including artificial intelligence and machine learning, robotics, hyper quantum computing, biogenomics and biotechnology, and high-tech manufacturing.

 

“We’ve got to pick these five areas and invest in them through public money, put a billion dollars a year in each one of them, get a coalition of hundreds of our best engineering schools, get a coalition of industry working with them and join together to accelerate the process of innovation,” he said.

 

Pai also added that India needs to have better methods for the ease of doing business in the country highlighting the need to attract foreign capital.

 

“The problem in India is the detail. We talk about ease of business, but what is it? What are the things you must do? I would urge startups and make a document on what law, regulation has to be carved out and given an exemption,” Pai said.

 

Pai added there was a need to ease the process to attract capital referring to the extensive bureaucracy required to enable foreign investments in the country.

 

“The Chinese got all the money in and they grew the country. We don’t allow money to come in…we harass them. For all the things that the Reserve Bank of India (RBI)) did the last two years, FDI has become negative. Foreign capital is not coming in and they’re getting harassed. I think we've got to clean this up,” he said.

 

Net foreign direct investment (FDI) in India -- inflows minus outflows -- declined to $1.18 billion during April-December 2024 from $7.84 billion in the same period in 2023 due to a rise in repatriation and overseas investments by Indian firms.

 

Gross inward FDI during April-November 2024 increased by 20.6 per cent year-on-year (Y-o-Y) to $62.5 billion from $51.8 billion a year ago, according to the Reserve Bank of India’s (RBI’s) data (February 2025 bulletin).