GS-III: Science & Technology | Artificial Intelligence | Regulation | IT Industry | International Trade
Context
- India considering AI legislation: The Government of India has indicated that it is considering a standalone legislation to govern Artificial Intelligence (AI).
- EU AI Act: The EU AI Act entered into force in August 2024 and became applicable on August 2, 2026.
- Risk-based regulation: The Act:
o Prohibits certain AI systems.
o Regulates high-risk AI systems.
o Imposes lighter requirements on limited-risk use cases.
- Relevance for India: The Act applies when Indian AI systems produce results in Europe, creating implications for India’s technology industry.
Post-Approval Modification: The Key Issue
- Different industry models: The EU AI Act assumes that software, once built and approved, is sold as a finished product.
- Indian IT model: India’s technology industry relies significantly on responsive adaptation and customised services.
- Conformity assessment: Before a high-risk AI system used for sensitive decisions such as hiring or education enters the European market, it must undergo conformity assessment under Article 43.
- Assessment requirements: It involves proof relating to:
o Testing.
o Documentation.
o Human oversight.
- Self-assessment: For most high-risk systems, providers can assess themselves against the Act’s criteria and issue their own declaration.
- Independent assessment: A narrower category, mainly certain biometric tools, requires assessment by an independent body.
‘Substantial Modification’
- Fresh assessment: If an AI system is “substantially modified”, the conformity assessment process must be repeated.
- Meaning: A substantial modification is a change:
o Not contemplated during the original assessment.
o Affecting compliance.
o Or altering the intended purpose.
- Timeline changes: In June 2026, the EU approved a package easing timelines:
o December 2027 for standalone high-risk AI systems.
o August 2, 2028 for high-risk AI embedded in regulated products.
- Grandfathering: Systems already on the market before these dates remain exempt from the Act’s obligations until they are substantially modified.
- Foreseen vs unanticipated change: A change examined during the original conformity assessment does not trigger a fresh assessment, while an unanticipated change likely does.
Impact on Indian Technology Companies
- Standardised products: Companies with predictable product road maps can assess planned upgrades during the initial assessment.
- Bespoke services: Companies providing customised services may find it harder to demonstrate that future changes fall within the original assessment.
- Indian IT industry: Large IT services firms and global capability centres in Bengaluru and Hyderabad depend on responsive adaptation.
- Liability: Firms substantially modifying another company’s high-risk AI system may be treated as the provider of the modified system.
- Regulatory consequence: An unplanned improvement that changes an AI system’s intended purpose may trigger a fresh regulatory exercise.
Compliance as an Opportunity for India
- Compliance workload: High-risk compliance requires:
o Governance measures.
o Technical documentation.
o Testing regimes.
- Professional services opportunity: The scale of compliance requirements can generate demand for legal and technical professionals.
- Existing capability: Indian professional services firms already support clients in:
o Data protection.
o Financial regulation.
o Technical assurance.
- Potential role: India can provide regulatory capability and compliance services for the EU AI Act.
India-EU Trade Agreement: A Strategic Opportunity
- Conformity assessment bodies: The EU AI Act provides a pathway for conformity assessment bodies established in third countries to be recognised as notified bodies, subject to appropriate agreements and requirements.
- Treaty negotiations: Such recognition depends on institutional arrangements between the EU and the concerned country.
- India-EU FTA: The India-EU Free Trade Agreement concluded in January includes standing machinery and regulatory cooperation provisions.
- Potential opportunity for India: India could seek institutional arrangements enabling it to become:
o A supplier of AI compliance services.
o A participant in the EU’s conformity assessment ecosystem.
- Long-term possibility: Qualified Indian conformity assessment bodies could eventually perform functions recognised under the EU AI Act.
Way Forward
- Adapt to compliance requirements: Indian technology companies need to account for the consequences of post-approval AI modifications.
- Build compliance capacity: India can leverage its existing pool of legal and technical professionals.
- Use the India-EU FTA: Regulatory cooperation mechanisms can be used to seek recognition for Indian conformity assessment capabilities.
- Convert compliance into an opportunity: India can move from merely responding to foreign AI regulations towards providing AI regulatory and conformity-assessment services.
Conclusion
The EU AI Act creates compliance challenges for India’s technology industry, particularly because Indian firms often operate through continuous and customised adaptation. At the same time, the scale of compliance creates an opportunity for India’s legal, technical and professional-services ecosystem. With appropriate use of the India-EU trade and regulatory cooperation framework, India could transform regulatory compliance from a constraint into an area of global service provision.
UPSC Mains Practice Question
Q. The EU AI Act presents both compliance challenges and opportunities for India’s technology industry. Discuss with particular reference to post-approval modifications of high-risk AI systems and India’s potential role in AI conformity assessment.
