The government has announced plans to establish over 20 data and AI labs under the India AI Mission across Tier 2 and Tier 3 cities. This number would be expanded to 200 by the next year to develop skilled professionals in the AI domain, Jitin Prasada, minister of state for electronics and IT, told the Lok Sabha on July 23.
This initiative, in partnership with the National Institute of Electronics & Information Technology (NIELIT), could be a step towards democratising AI access across India, aligning with the growing sentiment among investors and startups that AI innovation must extend beyond collaboration with IITs and metros.
The initiative aims to expand further, with a total of 570 labs in emerging urban centres over the next two years. “We are looking at training a minimum of 150,000 students with the 120-hour course on data annotation, data science, and data analytics,” an IT ministry official said, as reported by Hindustan Times.
About ₹68.98 lakh per lab will be provided over three years, while the initiative aims to support 500 PhD fellows, 5,000 postgraduate students, and 8,000 undergraduate students, Prasada said.
Ankita Vashistha, founding and managing partner at Arise Ventures, an early-stage tech fund, agrees that access to investment and AI innovation needs to extend beyond top institutes and metro cities. “A majority of people live in Tier 2 and Tier 3 cities. We’re a great country of engineering talent and colleges.”
Southern States Overlooked?
The government’s response, however, shows that except for Kerala, none of the South Indian states have been selected to establish these labs within the AI mission. While NIELIT has centres in Calicut, Chennai, Hyderabad, and Tirupati in southern states, only one of them has been selected for the first round of funding and establishment of the data/AI labs.
That 27 labs across north and east India have been prioritised in the first round indicates a focus on underrepresented regions.
Several states have nominated Industrial Training Institutes (ITIs) and Polytechnics for IndiaAI data labs. Karnataka has nominated 23 locations, Andhra Pradesh has 9, Telangana has 5, and Goa, Puducherry, the Andaman and Nicobar Islands, and Lakshadweep each have one.
As the approval process is expected to unfold in phases, taking into account NIELIT’s capacity and institutional readiness, these states may be included in a planned expansion by March 2026. Sasi Kumar Gera, the director of NIELIT Tirupati, reiterated this, adding that the institute was approved for establishment only the previous year.
Karnataka’s Case Beyond Bengaluru
Karnataka has also seen a significant dip in funding for its tech ecosystem. Tech startups in the state raised $1.7 billion in the first half of 2025, representing a 44% decrease from the $3.0 billion raised in the same period in 2024, AIM reported.
While much of the funding goes to Bengaluru, the country’s tech hub, other cities across the state seek more funding and initiative in terms of upskilling and AI literacy.
Initiatives from NASSCOM and the Karnataka Digital Economy Mission are aligning skill development with the demands of AI. The Karnataka government had planned to allocate ₹100 crore for deep tech development and reserve ₹300 crore for a Fund of Funds, the chief minister announced during the budget allocation. Both initiatives fall under the Local Economy Accelerator Programme (LEAP), which aims to boost innovation outside Bengaluru with a ₹1,000 crore grant and create 5 lakh job opportunities, as reported by The Hindu.
“Challenges include fragmented access to high-quality datasets, the need for upskilling mid-career professionals, & infrastructure gaps, especially in Tier 2 regions,” Anand Fernandes, CEO & director of EG Indi, said in a government newsletter.
Lack of deep-tech infrastructure and core AI research capabilities exist in these regions, along with funding gaps, especially in follow-on and growth stages for startups outside traditional venture capital corridors. There is a disconnect between talent, research, and real market opportunities. To bridge this gap, the state has implemented initiatives such as Kaushalya Karnataka and NIPUNA, Ekroop Caur, Karnataka secretary of the electronics, IT, biotechnology, and science and technology department, told Outlook Business.
Nipuna Karnataka focuses on training millions of young people in industry-relevant technical and non-technical skills through collaboration with industry to enhance their employability. It prioritises local talent, while ensuring inclusivity for women, individuals with disabilities, and rural youth. Additionally, it offers globally recognised certifications to validate the skills acquired, promoting equitable access and growth.
Initiatives such as the Karnataka Research and Innovation Authority and the New Age Innovation Network also provide crucial support for applied research and development. In 2022, Karnataka became the first state in India to implement a dedicated R&D policy, offering incentives for deep-tech innovation and promoting public-private partnerships.
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