India's enterprise AI investment surged 119 per cent in a single year — outpacing the global average of 110 per cent — yet only 22 per cent of Indian enterprises have testing, auditing, and risk-assessment processes in place, according to a report released on Tuesday, 8 September by technology firm ServiceNow. The finding underscores a widening gap between India's appetite for artificial intelligence and its readiness to govern it responsibly.

AI's Growing Share of India's IT Budget

According to the ServiceNow report, AI now accounts for 16.6 per cent of India's average IT budget — a figure projected to climb to 21.3 per cent by 2027. The report attributes India's investment momentum to world-class digital public infrastructure, deep engineering talent, and one of the fastest enterprise AI adoption rates globally.

Notably, 54 per cent of Indian organisations are already deploying AI agents. However, only 11 per cent have advanced to fully autonomous workflows — a gap that signals deployment is running well ahead of operational maturity.

The Governance Deficit

The report identifies a structural vulnerability at the heart of India's AI push: fragmented legacy systems. Only 18 per cent of Indian organisations have replaced these with an integrated platform, leaving no single layer through which AI can be effectively monitored, audited, or governed.

Data quality remains the most cited obstacle. Nearly 74 per cent of Indian enterprises flagged data accuracy, access, and management as the area most in need of strengthening for AI deployment, while 56 per cent pointed to legacy system integration as a critical bottleneck.

What the Industry Is Saying

Kulmeet Bawa, Managing Director and Group Vice President at ServiceNow India and SAARC, said the country has demonstrated its capacity to commit to AI at scale. 'India has proven it can commit to AI at a scale few markets can match. The next leap will be defined by how Indian enterprises pair that ambition with governance, connected data and workflows that let AI take on more consequential work,' Bawa said. He added that organisations that build these foundations first will unlock AI's next tier of value for India.

India's Policy Framework: Progress and Gaps

On the regulatory side, India has moved to establish an enabling framework — encompassing the Digital Personal Data Protection (DPDP) Act, the DPDP Rules, and the AI Governance Guidelines launched at the February 2026 AI Impact Summit. The IndiaAI Mission and the establishment of the IndiaAI Safety Institute further indicate a purposeful national approach, the report noted.

This comes amid growing global scrutiny of AI governance, with the European Union's AI Act already in force and the United States advancing its own federal AI standards. India's policy moves are directionally sound, but the gap between framework and enterprise-level implementation remains pronounced.

What Needs to Happen Next

For India to translate its investment surge into durable economic value, the report suggests enterprises must prioritise integrated data platforms, establish clear audit trails for AI decisions, and align internal workflows with the emerging national regulatory architecture. The organisations that close the governance gap earliest, the report argues, are best positioned to capture AI's next tier of productivity gains.