Background
The EU AI Act follows a risk-based approach:
Unacceptable-risk AI: Certain AI applications are prohibited.
High-risk AI: Subject to stringent requirements relating to testing, documentation, human oversight and conformity assessment.
Limited/minimal-risk AI: Lighter transparency and compliance obligations.
A key issue for Indian firms is “substantial modification.”
If a high-risk AI system is significantly modified after its initial conformity assessment, a fresh assessment may be required.
This is particularly relevant to India because its IT industry is strongly based on customisation, continuous upgrades and client-specific solutions, rather than only selling fixed software products.
Precautionary Principle:
Case: Vellore Citizens’ Welfare Forum vs Union of India.
The Supreme Court held that the State must anticipate, prevent and attack environmental degradation. Preventive action should precede scientific certainty regarding environmental harm.
According to experts, the precautionary principle is superior to the polluter pays principle, since prevention is more effective than post-damage compensation.
Sustainable Development:
The Court recognised environmental protection and economic development are complementary rather than contradictory.
Precautionary Principle and Polluter Pays Principle are essential components of sustainable development, now recognised as part of customary international law.
Public Trust Doctrine:
Case: M.C. Mehta vs Kamal Nath (Span Motel Case).
Natural resources are held by the State in trust for the public. Governments cannot permit their misuse for private interests.
Features
AI compliance services
The EU framework requires extensive:
Technical documentation
Testing and validation
Risk-management systems
Human oversight
Governance and record-keeping
Indian legal, technical and consulting firms can develop specialised AI compliance and assurance services.
Judicial Inconsistency in Environmental Cases
While the Supreme Court has historically strengthened environmental protection, concerns have emerged regarding inconsistency.
According to Justice Gautam Patel:
Courts have generally supported environmental causes raised by non-governmental organisations (NGOs).
However, judicial scrutiny has often been less rigorous in cases involving large infrastructure and development projects.
This creates a contradiction between the Court’s stated environmental principles and their practical application.
Such inconsistency weakens environmental governance and public confidence.
Opportunity for IT services industry
Indian IT companies and GCCs can turn their experience in software testing, cybersecurity, data protection and regulatory compliance into AI governance capabilities.
Conformity assessment ecosystem
The EU framework creates possibilities for qualified conformity-assessment bodies in third countries to gain recognition under appropriate international arrangements.
India-EU trade relationship
The India-EU trade agreement provides mechanisms for regulatory cooperation.
India could use this institutional framework to negotiate arrangements that allow qualified Indian bodies to participate in the European AI conformity-assessment ecosystem.
Challenges
Substantial modification problem
Indian firms frequently modify AI solutions according to client requirements. An unanticipated modification could potentially trigger a new conformity-assessment process.
Compliance costs
Extensive documentation, testing and governance can increase costs, particularly for smaller Indian companies.
Regulatory uncertainty
Technical standards and detailed compliance requirements are evolving, making it difficult for companies to design long-term compliance strategies.
Risk of reduced innovation
Excessive regulatory burdens could discourage experimentation and rapid deployment of AI solutions.
International recognition
For Indian conformity-assessment bodies to participate formally in the EU ecosystem, appropriate recognition and institutional arrangements with the EU would be necessary.
Way Forward
Build an Indian AI assurance industry: Develop specialised firms for AI auditing, testing, certification and compliance.
Strengthen India-EU regulatory cooperation: Use the trade agreement to pursue mutual recognition and institutional cooperation in AI standards.
Develop global AI standards expertise: Indian institutions should participate actively in international standard-setting.
Create predictable domestic regulation: India’s proposed AI framework should balance innovation with safety, transparency and accountability.
Upskill professionals: Train lawyers, engineers, auditors and policymakers in AI governance and regulatory technology.
Support MSMEs and startups: Provide standardised compliance frameworks and affordable testing facilities to prevent regulation from becoming a barrier to entry.
Conclusion
EU AI Act might be seen as an issue of compliance for Indian tech firms at first sight; however, it can be converted into a substantial business opportunity. India has a massive workforce of technology professionals, a well-developed IT services sector and good knowledge of regulatory and technical services. With the help of that, by adding to it India-EU regulatory collaboration, India can not only comply with European AI legislation, but also export its compliance, assurance and certification services. Hence, the new AI regulation can convert “rules India fears” into “services India sells.”
