AI washing threatens India’s tech brand: A growing number of Indian firms are coming under scrutiny for overusing the AI label in their marketing pitches—often applying it where artificial intelligence is used merely as a tool for marginal efficiency gains rather than as a core driver of innovation or technological transformation. Industry experts warn that many of these companies—particularly newer startups—are branding themselves as AI-driven, even though their use of artificial intelligence is superficial at best.
While some level of AI adoption is undeniable, many firms are simply wrapping existing technologies with AI as a veneer, without fundamentally rethinking workflows or building truly AI-native products. This practice—known as AI washing—refers to the exaggeration or misrepresentation of AI capabilities and is becoming a global concern. It misleads consumers and investors alike and poses serious reputational and financial risks.
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Widespread misuse of AI label
A notable example is Amazon’s much-publicised Just Walk Out checkout technology, which promised a futuristic retail experience where customers could leave a store without stopping at the cashier. The company claimed the system used a sophisticated mix of computer vision, sensor fusion, and deep learning. However, it was later revealed that the bulk of transactions—reportedly around 70%—were manually reviewed by over 1,000 workers in India. The episode reveals how even tech giants are not immune to the temptation of AI washing.
The issue goes beyond semantics. While some vertical SaaS (Software as a Service) companies in India are integrating AI to optimise routine tasks, true vertical AI solutions involve reimagining business models and operations. In reality, many firms label even the smallest automated tool as AI-powered, diluting the term and misleading stakeholders.
Why AI washing is a problem for India
AI washing risks not only undermining trust but also exposes a deeper structural challenge. It signals that despite India’s massive talent pool and demographic dividend, the country still trails global leaders like the US and China in foundational AI research, product innovation, and ecosystem development.
One key reason for this shortfall is the persistent outflow of top-tier technical talent to countries like the United States. Many of India’s most capable AI engineers and product developers have relocated abroad, limiting the country’s ability to develop indigenous, AI-native solutions. India is rich in tech talent, but it remains on the fringes of cutting-edge AI development.
Funding is another major bottleneck. According to data from Tracxn, Indian AI startups attracted just $171.4 million across 30 rounds in 2024, and a mere $12.5 million across two rounds in Q1 2025. In stark contrast, China raised $3.3 billion in 2024 and $220 million in Q1 2025, while the US attracted a staggering $34 billion in 2024 and $6.2 billion in just the first quarter of 2025. The disparity in financial backing hinders India’s ability to compete on the global AI stage.
Global problem, local implications
AI washing isn’t unique to India. Regulators in the US, EU, and Australia are already taking action. In September 2024, the US Federal Trade Commission launched Operation AI Comply, targeting deceptive practices around AI marketing. The message is clear: misleading claims won’t go unchecked.
India, too, must confront the issue head-on. Companies need to embrace greater transparency and honesty in how they market their AI capabilities. The government, for its part, should consider setting clear definitions and standards for what qualifies as an AI-driven startup to prevent misuse of the label.
Despite these concerns, there are signs of progress. According to an IBM study, 87% of IT decision-makers in India reported substantial progress on their AI strategies in 2024, with 76% saying their initiatives have delivered measurable returns. Encouragingly, 93% plan to increase AI investments in 2025, and 71% intend to leverage open-source ecosystems to strengthen their AI efforts.
The enthusiasm is there—but so is the responsibility. If India is to harness the full potential of artificial intelligence, it must move beyond marketing jargon and focus on fostering genuine innovation. That means not just regulating AI claims, but also investing in foundational research, retaining top talent, and supporting startups that are building AI from the ground up.
In a world increasingly powered by intelligent systems, credibility is currency. Companies that overstate their AI credentials risk more than embarrassment—they jeopardise investor trust, customer loyalty, and the future of India’s digital economy.