European Union’s recent legislation on AI establishes different deadlines and rules depending on the AI’s risk level. This might raise expenses for Indian developers, experts say.
Indian AI developers and startups might face heightened expenses and compliance pressures due to the European Union Artificial Intelligence Act. This can potentially affect their competitiveness in the region, experts told the Economic Times.
Last week, the European Union approved the World’s first law governing AI development. Legal advisors specialising in technology have emphasised that regardless of their location, Indian organisations placing AI models in the EU market are subject to the Act and must adhere to it. This requirement will raise the compliance workload and expenses for Indian startups and enterprises, potentially affecting their activities and expansion strategies within the European market.
The legislation, which will be effective from the end of June, has a risk-oriented strategy that results in varying regulations and deadlines for different types of AI systems. General-purpose AI systems must comply within a year, while high-risk ones have a compliance period of up to three years.
Additionally, the prohibition of AI systems presenting unacceptable risks will be effective within six months of the Act’s enactment. Experts suggested that companies might need to conduct risk assessments within six months to categorise their systems and make necessary preparations.
The regulations have raised concerns about small and medium enterprises in the business. Professionals in the industry have noted that compliance would result in significant expenses and administrative challenges. This burden may lead to a potential loss of competitive edge.
Indian firms such as Yellow AI, Sigtuple, and Qure AI operate in the EU region. Some of them are already aiming for international expansion, including other parts of Europe. In the present scenario, when they are planning to launch a new AI-based product, they will need to ensure risk management procedures. The product has to undergo conformity evaluations before market entry, among other requirements. The law states that failure to comply could result in fines of up to €1,50,00,000 or 3% of the total turnover.
In the report by ET, Hemant Krishna, partner at Shardul Amarchand Mangaldas & Co, advised Indian startups entering the EU market to be cautious with AI deployment beyond the exceptions in the EU AI Act.
However, Krishna highlighted that the Act acknowledges the necessity of reducing compliance burdens for startups and SMEs. It suggests initiatives such as sandboxing, education, and outreach efforts, as well as dedicated communication channels for clear regulations and discounted fees for certain assessments. He also said that startups should anticipate higher costs and the need for customisation in their offerings.
According to another expert, the global tech industry will undoubtedly feel a major impact, requiring rigorous research and testing before deploying AI models for public use.
India is expected to come up with a new IT Law after the general elections, which is likely to include AI. The EU has opted for strict regulations with penalties, while the US has preferred flexible frameworks like standards and guidelines to encourage responsible AI and innovation. Experts suggest India’s regulations should reflect its unique context, while also aligning with international standards to minimise confusion for AI businesses.
