The Indian government has rapidly moved to address the risks posed by the global surge in AI investments and valuations, positioning regulatory action as its primary defense against a potential “AI bubble” burst and its economic spillover into domestic markets. Authorities have proposed sweeping amendments to current laws, including the Information Technology Act, that would require platforms to label AI-generated content, especially deepfakes, to combat misinformation and manipulation risks amplified during elections or times of social unrest. This data-labelling push aims to equip citizens, regulators, and businesses with transparency, ensuring a clear distinction between synthetic and authentic content in a digitally complex environment.

Beyond safeguarding societal stability, the Indian government is accelerating efforts to build sovereign AI capabilities, such as the BharatGen initiative—a trillion-parameter foundational model tailored for Indian needs, backed by nearly ₹1,000 crore in funding and high-performance infrastructure. The strategy is not just defensive: India seeks to assert its autonomy in AI standards, encourage responsible innovation, and foster a competitive AI sector resilient to international market shocks. Agencies like the Competition Commission of India (CCI) and the Securities and Exchange Board of India (SEBI) are also crafting guidelines for fair competition and responsible AI deployment across industries, aiming to prevent anti-competitive practices and mitigate systemic risks to financial markets.

These layered efforts reflect a unique policy approach: balancing robust legal safeguards, market oversight, and the ambition to make India a global AI powerhouse. The government is determined to shield its economy from reckless AI-driven exuberance and shape global governance frameworks that respect India’s digital, linguistic, and socio-economic diversity. If the AI bubble bursts globally, these moves could insulate India’s financial system, boost the credibility of its technology sector, and even position India as a safe, stable hub for responsible AI development and deployment.