(Bloomberg) -- From the US to China, internet giants and startups are spending billions to stake out a spot in a rapidly expanding AI sphere. India too can become a formidable contestant in that race, industry experts say.

From DeepMind Technologies co-founder Mustafa Suleyman to Stanford researcher Fei-Fei Li, some of the field’s biggest names debated this week in Mumbai how India — the country that pioneered the $250 billion IT outsourcing industry — can become a player in the transformative technology.

The country has several advantages, including one of the world’s largest pools of IT and engineering talent and a fast-growing domestic market, they concluded. The market for AI software globally could reach $297 billion by 2027, Gartner estimates. In India, demand for AI services alone could be worth $17 billion that year, according to a report issued this week by IT industry body Nasscom and consultancy BCG. 

First though, India will have to weather unpredictable disruptions from AI, which threatens to displace jobs from call-center outsourcing to programming. On another front, unlike the US and China, a lack of infrastructure for training large-language generative AI models will force local aspirants to build smaller platforms — though in the longer-term, Indian firms can still compete with the likes of OpenAI and China’s Baidu Inc.

“We will see two trends: eye-wateringly large LLMs, a thousand times larger, will get built. But bigger is not necessarily better,” Suleyman said via live video link during Nasscom’s annual conference, a summit of executives from IT pioneers such as Infosys Ltd. and Tata Consultancy Services Ltd. “Smaller, cheaper-to-run models, open-source models, will work very well.”

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Some of India’s highest-profile companies and New Delhi itself are supporting that broader effort. A consortium backed by Mukesh Ambani’s Reliance Industries Ltd. and India’s top engineering schools aim to launch its first ChatGPT-style service next month.

Startups such as Sarvam and Krutrim, backed by prominent VC investors such as Lightspeed Venture Partners and billionaire Vinod Khosla, are building open-sourced AI models customized for India. While Silicon Valley companies like OpenAI are building ever-larger LLMs, Indian efforts involve workarounds because of computational and cost constraints for smaller businesses and government departments.

“People and talent is India’s biggest advantage,” said K. Krithivasan, chief executive officer at TCS. But “there will be some dislocation of jobs, some disruption. We need to change the way we train. The kind of people we hire also needs to change: critical thinking, ability to strategically plan, creativity are all going to be important.”

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Artificial intelligence is stirring up industries around the globe, revamping traditional processes and driving change. That’s of particular concern to India’s IT industry, which serves many of the world’s biggest enterprises from banks to manufacturers, accounts for about 8% of the country’s GDP and employs 5.5 million.

“Every technology and business leader must use AI as a tool,” said Li, a computer scientist regarded as a trailblazer in the specialty of computer vision. “How we think, how we learn, how we are taught, how we are assessed, all need to change.”

The world’s most populous country is already grappling with employment shortages. The fear is that artificial intelligence could exacerbate the situation.

Last week, Nasscom said India’s IT industry would add merely 60,000 employees in the year ending March. Just two years ago, a single company like TCS would have taken on that headcount. Revenues are projected by Nasscom to slow sharply this fiscal year. 

Longer term, India has an unprecedented opportunity to drive economic growth, Microsoft Corp. CEO Satya Nadella said in Mumbai this month. Countries that adopt the technology will have the chance to expand their expertise and push up economic growth, he said.

“AI is the perfect storm for India,” said Nasscom president Debjani Ghosh. 

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