NEW DELHI: India's artificial intelligence (AI) startup ecosystem is witnessing a major boom, driven by the rapid adoption of AI-powered software-as-a-service (SaaS) solutions, a new report said on Wednesday.
The government has already committed Rs 2, 000 crore to the IndiaAI mission and increased funding for AI Centres of Excellence by 82 per cent -- a strong push towards AI infrastructure growth.
SaaS has emerged as the dominant force shaping India's AI landscape as enterprise AI spending surged six times year-on-year (YoY) to $13.8 billion in 2024 as compared to $2.3 billion in 2023.
Nearly 66 per cent of AI startups in India are focused on AI-powered applications, with Enterprise AI SaaS leading the sector, according to the SenseAI’s ‘InvestAI 2025’ report.
These companies are set to reshape the software industry by moving away from traditional subscription models to pricing structures based on outcomes.
“AI SaaS firms are already trading at 2X the multiple of a non-AI SaaS company. AI-first companies are scaling faster than ever before, ” said Rahul Agarwalla, Managing Partner, SenseAI.
The evaluation of 849 AI startups confirms that India is focused on AI applications and tooling. “The next wave of AI innovation will be shaped by how India builds its AI backbone, ” he noted.
Another major trend is the rise of Edge AI, which allows AI to run directly on devices rather than relying on cloud computing.
Investments in Edge AI are expected to grow from $21 billion to $143 billion by 2034 as AI-powered applications in smartphones, wearables, and IoT devices are expected to increase.
This shift is making AI more accessible and opening new revenue streams in consumer technology.
The media and gaming industry is also experiencing a transformation, as generative AI continues to reshape content creation, the report said.
Additionally, AI tooling startups, which help optimise and scale AI deployment, are gaining traction, making up 22 per cent of India’s AI startup landscape.
According to report, the next five years will be crucial in determining India’s position in the global AI race -- not just as a user of AI but as a creator of AI-first businesses.