India’s artificial intelligence (AI) innovation ecosystem could benefit from a sandboxing framework similar to the one used in the financial sector, according to Panneerselvam Madanagopal, CEO of the Ministry of Electronics and Information Technology (MeitY) Startup Hub.
In the policy and regulatory context, sandboxing refers to a controlled environment where emerging technologies can be tested under real-world conditions, but with regulatory oversight and safeguards. The goal is to allow startups to innovate without being immediately subject to full-scale legal and compliance requirements—while still upholding consumer protection, data security, and ethical standards.
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Previously, the Reserve Bank of India (RBI) introduced regulatory sandboxes to spur innovation in the financial sector—covering areas such as digital banking, payments, lending, and financial inclusion—while managing systemic risk.
These sandboxes allowed fintech startups to test new products or business models with a limited set of users under close regulatory supervision. At the same time, the RBI was able to observe emerging technologies and craft smarter, more adaptive regulations.
Madanagopal, speaking at the Startup Mahakumbh in New Delhi, suggested a similar model could help drive India’s AI ambitions.
“We’ve built amazing width, but now, it’s time to build depth—creating fundamentally strong, sustainable, product-driven companies from India,” Madanagopal said at the Startup Mahakumbh in New Delhi.
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However, Madanagopal did not provide further details on whether the government intends to formally introduce a sandbox framework for AI. So far, the idea remains exploratory.
That uncertainty reflects a broader tension in India’s evolving approach to AI regulation. The government has oscillated between introducing formal regulations and promoting self-regulation for the sector. In January, the Ministry of Electronics and Information Technology (MeitY) released a report on developing AI governance guidelines.
The recommendations reveal a dual approach—balancing the need for regulatory frameworks with the flexibility of self-governance.
Madanagopal emphasized that beyond policy architecture, a shift in startup culture is also essential. He called for founders to move away from the instant-gratification mindset that dominates much of the current startup landscape.
“What we really need is a slight change in mindset—we’re living in a world of instant gratification. Instant success and instant growth seem to be driving a lot of young startups today.”
Madanagopal urged founders to embrace a longer-term vision rooted in research and development. “If startups can embrace a mindset of deferred gratification and long-term success, it will naturally lead them toward R&D-led, product-led innovation—something that can truly reshape how great companies emerge from the Indian startup ecosystem.”
One recurring pattern he’s observed: many founders begin with a product dream but end up diverted by the cash flow of services.
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“Eventually, the product gets parked, since services give cash flow. But that temptation is exactly what I’d urge young founders to resist,” he said. “Stay focused, stay invested in your product-led, R&D-driven vision. That’s what will shift the game. Don’t take your eye off your product dream for short-term cash flow.”
Under the IndiaAI Mission, which has a total financial outlay of ₹10,372 crore, ₹1,942.5 crore—or roughly 18.7%—has been earmarked for startup financing.
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