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Strategic Context: From Economic Partnership to Technology Competition
India’s Act East Policy (AEP), formally articulated by Prime Minister Narendra Modi in 2014, has evolved significantly since its predecessor, the Look East Policy (LEP), launched in the early 1990s. What began as an economic engagement framework has progressively incorporated defense and security dimensions, with India securing BrahMos missile deals with Indonesia, the Philippines, and Vietnam. However, the policy now faces a critical inflection point: artificial intelligence and advanced technologies have become the defining competitive battleground in the Indo-Pacific, forcing New Delhi to fundamentally recalibrate its regional engagement strategy.
The structural constraints facing India’s technology sector are substantial and mounting. Western visa restrictions, particularly H-1B visa caps in the United States, combined with escalating technology export controls and the economic burden of one-way talent mobility, have exposed the fragility of India’s dependence on traditional Western technology partnerships. These pressures coincide with U.S. enforcement of AI-related export controls, which directly threatens India’s capacity to develop indigenous AI capabilities. This convergence of challenges has made AI diplomacy not merely a peripheral concern but a central pillar of India’s Act East Policy framework.
The Five-Layer AI Stack and Regional Diversification
India’s AI sovereignty ambition rests on achieving indigenous capability across five critical layers: applications, AI models, semiconductors, infrastructure, and energy systems. This is not merely an aspirational goal—it reflects a calculated assessment that technological self-reliance cannot be achieved through Western partnerships alone, particularly given current geopolitical tensions and export restrictions.
The strategic logic is compelling. Japan, South Korea, Taiwan, and Singapore possess complementary strengths across this stack. Japanese companies dominate advanced manufacturing and robotics; South Korean and Taiwanese firms lead in semiconductor design and chip manufacturing; Singapore functions as a regional innovation hub with strong venture capital ecosystems. Rather than competing with these partners, India’s AEP must position itself as an integrator, leveraging its talent pool, large domestic market, and growing manufacturing capabilities to create genuinely collaborative technology development ecosystems.
The India Semiconductor Mission (ISM) 1.0 has already demonstrated proof of concept, signaling to regional conglomerates that New Delhi is serious about building domestic semiconductor capacity. ISM 2.0 should explicitly target East Asian chip manufacturers seeking to diversify away from Chinese supply chain dependencies—a strategic opening that exists now but may not persist indefinitely.
Operationalizing AI Cooperation: From Statements to Concrete Projects
India’s bilateral AI engagement initiatives have begun to take institutional form. The Japan-India AI Cooperation Initiative (JAI), operationalized through the First India-Japan AI Strategic Dialogue on April 21, 2026, represents the most advanced framework to date. Similarly, the India-Korea Digital Bridge, launched in April 2026, explicitly targets cooperation across AI, semiconductors, and electronics. Under the ASEAN-India Comprehensive Strategic Partnership 2026-2030 Plan of Action, New Delhi and Southeast Asian governments are collaborating on AI governance standards and regulatory frameworks.
However, these institutional mechanisms remain largely aspirational. The critical gap lies between joint statements and tangible co-creation projects. India must move beyond bilateral dialogue frameworks to identify specific, measurable technology development initiatives. This requires three distinct but interconnected approaches:
- Strategic Research Cooperation: India’s AI startup ecosystem and technical talent pools are increasingly moving beyond traditional Software-as-a-Service (SaaS) and Business Process Outsourcing (BPO) models toward AI-enabled engineering solutions. Rather than competing on compute-intensive generative AI systems where Western companies hold decisive advantages, India and its East Asian partners should pioneer alternative AI development trajectories focused on data aggregation workflows, custom solutions engineering, and domain-specific AI applications.
- Investment Attraction in Chip Manufacturing: South Korean, Taiwanese, and Japanese companies are actively seeking to de-risk from the Chinese market. India’s manufacturing sector, combined with government incentives through ISM 2.0, creates a compelling investment case for memory-chip manufacturing, packaging, and testing operations. This requires proactive outreach from New Delhi to technology conglomerates, mirroring the diplomatic engagement model successfully deployed in India’s shipbuilding sector.
- Talent Mobility with Knowledge Repatriation: Japan’s ASEAN-Japan Co-Creation Initiative for AI (launched October 2025) provides a viable model emphasizing human resource development and structured industry-academia-government collaboration. Indian engineers and domain specialists should be systematically placed in Japanese industrial labs, Singaporean research institutes, and Vietnamese technology hubs to jointly develop precision AI systems for manufacturing, supply chain optimization, and robotics. Critically, intellectual property and technical knowledge must flow back to strengthen India’s domestic ecosystems, not remain captured in host countries.
Removing Structural Barriers to Supply Chain Integration
Even as India pursues AI diplomacy, persistent business environment challenges continue to undermine regional technology partnerships. Regulatory complexity, land acquisition delays, high logistics costs, and compliance burdens have historically deterred foreign direct investment despite India’s growing attractiveness as a manufacturing destination. These frictions push multinational technology companies toward Vietnam, Thailand, and Indonesia—competitors for the same regional investment flows.
India’s AEP must therefore incorporate targeted regulatory reform as a complementary pillar. Fast-track bilateral mechanisms for company registration, environmental clearances, and land leasing agreements should be negotiated with key partners like Japan, South Korea, and Singapore. These measures would reduce transaction costs and timelines, making India a more competitive destination for AI-adjacent manufacturing and R&D operations.
Additionally, India should establish a Technology Council modeled on existing bilateral business councils. This institutional mechanism would enable AI diplomacy to operate at multiple levels simultaneously—government-to-government dialogue, corporate partnerships, and startup-to-startup collaboration. Such a structure creates sustainable, self-reinforcing engagement patterns that reduce dependence on high-level political attention and create natural incentives for continued cooperation.
Inclusive Architecture: Domestic Startups and Open Standards
A critical vulnerability in India’s current AI diplomacy framework is the exclusion of domestic startups from bilateral partnership discussions. India’s AI startup ecosystem has matured substantially, with companies developing domain-specific solutions in agriculture, healthcare, manufacturing, and financial services. These startups should be systematically connected with counterparts in Japan, South Korea, Singapore, Vietnam, Malaysia, and Thailand through structured co-creation programs.
Equally important is India’s strategic positioning on open standards and open-source architectures. Rather than pursuing proprietary AI systems that risk vendor lock-in and reduce interoperability, India and its regional partners should jointly develop transparent, standards-based AI infrastructure. This approach reduces dependency on any single technology provider, accelerates knowledge transfer, and creates genuine competitive advantages in emerging domains like digital twins for smart manufacturing and urban infrastructure optimization.
Strategic Outlook: Consolidating the AI Dimension of Act East
India’s Act East Policy stands at a decisive juncture. The policy’s first decade successfully deepened regional defense partnerships, but defense cooperation alone cannot address the technological competition now defining Indo-Pacific geopolitics. Artificial intelligence will determine industrial competitiveness, military capability, and economic dynamism for the next two decades.
India possesses genuine competitive advantages: a large, skilled technical workforce; a growing domestic AI market; government commitment to semiconductor manufacturing; and genuine complementarities with East Asian technology leaders. However, these advantages will be squandered if India treats AI cooperation as an abstract diplomatic objective rather than a concrete, operationalized strategy with measurable deliverables.
The window for establishing these partnerships is finite. As U.S.-China technological competition intensifies, regional countries will face mounting pressure to choose sides. India’s strategic opportunity lies in positioning itself not as a proxy for either superpower but as a genuine technology partner capable of co-creating solutions tailored to Asian markets and challenges. This requires moving from bilateral dialogue frameworks to concrete research partnerships, targeted investment attraction, and structured talent mobility programs that genuinely benefit all participants.
The institutional mechanisms are beginning to form—JAI, the India-Korea Digital Bridge, and the ASEAN-India partnership framework provide operational platforms. The challenge now is converting these platforms into sustained technology co-creation ecosystems. Success will require sustained political commitment, regulatory reform, and deliberate inclusion of India’s private sector and startup community. Failure to act decisively risks allowing India’s technological dependence on Western partners to calcify precisely when regional alternatives are available and willing to partner.
