India likes to describe itself as the world’s science talent factory with 1.5 million new engineers and thousands of scientists (PHDs) passing out each year. It has world-class engineers, globally respected technology institutes, a thriving software industry and an entrepreneurial startup ecosystem. Yet when it comes to creating globally competitive artificial intelligence companies in biotechnology and life sciences or any other field, India Inc is steadily losing ground to China and others.The uncomfortable truth is that India is trying to compete in tomorrow’s industries with yesterday’s business model.For decades, Indian companies have mastered execution. They built globally competitive Information Technology (IT) services firms, became the pharmacy of the developing world through generic drugs (copying originals) and perfected contract manufacturing. The future led by Artificial Intelligence (AI), however, rewards those who invent rather than merely follow others or cash in on labour arbitrage.India has talent but lacks willingnessFew people understand this better than Dr Gunjan Bhardwaj, founder of AI-driven drug development company Partex in Germany, which operates across Europe and India and employs more than 250 scientists, AI engineers and researchers in Pune.His message is blunt: India has the talent but lacks the willingness to invest in original research.“India is the world’s biggest AI talent pool,” Bhardwaj, who graduated from IIT Mumbai, tells me. Yet talent alone is not enough if companies continue to underinvest in research and development while competitors race ahead.The numbers explain why India is struggling to build globally competitive AI companies.The pharmaceutical industry spent only about $3 billion (Rs 209.8 billion) on research and development in 2018-19. For an industry that aspires to move beyond generics into innovation-led drug discovery, that remains a modest investment, as per the Economic Survey, 2025.The broader innovation picture is even more concerning.According to the Economic Survey 2025-26, India’s Gross Expenditure on Research and Development (GERD) stands at just 0.64% of Gross Domestic Product (GDP), substantially below the global average and well behind the United States (3.48%), China (2.43%) and South Korea (4.91%). Even more striking is the role of private enterprise. Indian businesses account for only 41% of the country’s total research and development (R&D) expenditure, compared with 77% in China, 75% in the United States and 79% in South Korea. As per a report in Business Standard, India Inc’s R&D spending hit a decadal low in FY25 as most of them prioritised record shareholder payouts over critical technological innovation.In other words, India’s innovation problem is not merely a government problem. It is a corporate problem. That gap is already beginning to show in artificial intelligence and biotechnology.According to Bhardwaj, one-third of all drug assets licensed globally now originate in China. Citing industry estimates, he notes that around 40% of global biotech innovation is emerging from China. Chinese cities such as Shanghai have built dedicated ecosystems that incubate more than a hundred foundation-model companies, backed by patient capital and long-term industrial policy.India, meanwhile, continues to celebrate software exports while spending relatively little on deep-tech innovation. Low R&D budgets should worry India Inc and the pharmaceutical industry in particular.Indian drugmakers have become global leaders in generics, contract manufacturing and biosimilars. But AI is fundamentally changing the economics of pharmaceutical research. Companies that own proprietary AI platforms capable of improving clinical trial design, identifying new therapeutic indications for existing molecules and reducing development timelines will command disproportionate value over the next decade.Partex itself illustrates this shift.Rather than focusing solely on discovering entirely new molecules, the company uses AI to improve decision-making across clinical development. As Bhardwaj points out, there are more than 18,000 drugs currently in clinical development worldwide, while the US Food and Drug Administration approves only about 50 every year.“The lion’s share of impact would come if you were to focus on the efficiency problem,” he says. AI can determine the optimal clinical trial design, identify patient populations with the highest probability of success and recommend combination therapies that improve outcomes.AI is rapidly becoming the operating system for all industriesThese are no longer futuristic concepts. They are becoming competitive advantages. The implications extend far beyond pharmaceuticals.AI is rapidly becoming the operating system for industries ranging from healthcare and manufacturing to financial services and defence. Companies that continue treating AI merely as a productivity tool rather than a research platform risk becoming permanently dependent on technologies developed elsewhere.China appears to understand this better than almost anyone else.“What I admire about China is how quietly they work hard and suddenly surprise everyone,” Bhardwaj says. “They have done this in various industries.”The comparison with India is uncomfortable.“We do a lot of marketing,” he says. “But we need more success stories.”That criticism should resonate in Indian boardrooms.Corporate India has marginally increased spending on R&D and digital transformation over the past decade. But much of that expenditure has gone into adopting technology rather than inventing it. AI budgets are frequently allocated to automation projects that improve operational efficiency instead of building proprietary intellectual property.The next phase of AI competition will not be won by buying software licences or integrating chatbots into customer service. It will be won by companies willing to fund PhDs, establish AI research laboratories, build proprietary datasets, acquire frontier AI startups, partner with universities and invest in high-performance computing infrastructure. These investments may not generate quarterly returns, but they will determine which companies dominate the next decade.Partex’s own journey offers an important lesson. The company became an early partner of NVIDIA in 2017 – long before AI became fashionable – investing in specialised computing infrastructure and building collaborations with IIT Bombay, Indian pharmaceutical companies and government healthcare institutions. Those investments created capabilities that cannot be replicated overnight.India’s policymakers also have work to do.If the country wants to become a leader in AI-powered healthcare and biotechnology, it must create stronger incentives for private-sector R&D, improve access to long-term risk capital and provide a stable policy environment for innovation. China did not become a biotechnology powerhouse through contract manufacturing alone. It invested consistently in research, talent and commercialisation over decades.The stakes extend far beyond corporate profitsIndian companies must now make a similar choice. The stakes extend far beyond corporate profits.Bhardwaj warns that AI will automate many entry-level jobs that traditionally served as the training ground for future professionals.“There won’t be any jobs,” he says, referring to many junior positions that AI could replace.That makes innovation not merely a business opportunity but an economic necessity. India still possesses enormous strengths: a vast talent pool, globally respected scientific institutions, successful entrepreneurs and one of the world’s largest domestic markets. But these advantages will matter only if they are matched by sustained investment in frontier research.The message for corporate India is clear. AI cannot be treated as another technology upgrade. It demands patient capital, long-term thinking and a willingness to spend on research whose commercial payoff may take years to emerge. India has to move beyond data centres and global capability centres (GCCs).The country does not suffer from a shortage of engineers or scientists. It suffers from a shortage of companies willing to bet on them. The AI race has already begun. China is accelerating and so is the US.India can still compete – but only if its boardrooms stop thinking like service providers and start behaving like inventors.Dev Chatterjee is a senior journalist and co-author of The Meltdown and India Inc’s Greatest Turnarounds.