Europe’s AI rules may become India’s opportunity
India could build an industry around the paperwork and proof required under the European Union’s Artificial Intelligence (AI) Act
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Context
The has implemented its , adopting a risk-based approach to regulate AI systems, which will become fully applicable by 2026. This editorial highlights how the Act’s stringent compliance requirements, particularly regarding post-approval updates to 'high-risk' AI, pose challenges for India's adaptable IT service model but also present a significant opportunity for India to export AI compliance and conformity assessment services under the recently concluded .
UPSC Perspectives
Economic
The ’s creates a significant non-tariff barrier for global tech firms by mandating rigorous 'conformity assessments' for high-risk AI systems. The Act assumes a traditional software model where a product is finished, approved, and sold. However, India's IT industry, heavily reliant on Global Capability Centres (GCCs) and bespoke IT services, operates on continuous, responsive adaptation to client needs. The Act stipulates that any 'substantial modification'—an update altering the AI's intended purpose or compliance—triggers a fresh regulatory assessment. This creates a compliance burden that could disrupt the agile business models of Indian IT firms, as they may inadvertently inherit the liability of the original provider if they modify a high-risk system. UPSC often examines the impact of extraterritorial regulations on Indian exports; candidates should analyze how the might necessitate a shift in the operational strategies of Indian IT service providers to maintain their competitive edge in the European market.
Governance
The represents a landmark in global tech governance by operationalizing a risk-based regulatory framework (categorizing AI into unacceptable, high, limited, and minimal risk). High-risk systems require extensive documentation, human oversight, and testing. This regulatory burden paradoxically creates an opportunity for India to leverage its vast pool of legal and technical professionals. Just as India capitalized on the Y2K bug and GDPR compliance, it can become a global hub for AI regulatory capability, providing the 'paperwork and proof' required by the EU. The editorial suggests that India should transition from merely providing compliance services to actively participating in the EU's conformity assessment ecosystem. This aligns with the broader governance challenge of regulating emerging technologies while fostering innovation, a frequent theme in GS Paper 3. India's own upcoming standalone AI legislation should carefully balance these aspects, learning from the EU's prescriptive approach.
International Relations
The editorial underscores the strategic utility of the (TEPA) in navigating the new AI regulatory landscape. The allows for conformity assessment bodies in third countries to be recognized if an appropriate international agreement exists. The TEPA, which includes provisions for regulatory cooperation, provides the necessary legal framework for India to negotiate this recognition. If successful, qualified Indian bodies could perform conformity assessments recognized under the EU Act, integrating India deeper into the global tech supply chain. This highlights the evolving nature of economic diplomacy, where trade agreements are increasingly used to address non-tariff barriers and secure institutional arrangements in emerging sectors like AI. UPSC candidates should understand how bilateral agreements like the can be leveraged to turn regulatory challenges into strategic economic opportunities.