The Catfish Effect: How AI Is Catapulting Indian Tech Into Its Next Orbit

In every industrial transformation, there comes a catalytic moment when a new force jolts an entire ecosystem into motion, exposing inertia, rewriting hierarchies, and compelling reinvention. 

For Indian technology today, Artificial Intelligence (AI) is that force.

It is the catfish for the country’s entire technology value chain — from legacy IT services to startups, PSU labs, universities, and regulators. 

The Catfish Effect: A New Competitor As A Catalyst

The “Catfish Effect” stems from an elegant insight drawn from aquaculture. When sardines were shipped alive over long distances, they often arrived listless, sluggish, and unfit for consumption. Fishermen realised that introducing a single catfish into the tank kept the sardines active and agile throughout the journey, ensuring they arrived fresher and of higher quality. 

The sardines were tastier because they kept swimming to survive the introduced threat of the catfish.

In business and technology, this metaphor captures how the entry of a formidable new player or disruptive idea can jolt a complacent ecosystem into renewed energy, forcing incumbents to adapt, innovate, and accelerate their evolution.

When comfort breeds complacency, a catfish restores urgency. It redefines what “good” looks like and forces the entire ecosystem to evolve.

From Copycats to Category Leaders

Few modern examples illustrate the Catfish Effect better than Tesla’s entry into China.

In 2019, China made an extraordinary exception to its own rules: it allowed Tesla to build and wholly own its Gigafactory in Shanghai. For decades, Beijing had mandated that foreign automakers form 50-50 joint ventures with local partners, a firewall to protect domestic companies from being out-competed. 

Yet, for Tesla, the rulebook was rewritten. China offered tax breaks, free land, and full foreign ownership. It was a calculated risk, not a concession out of desperation. China wanted a catfish.

Tesla brought with it cutting-edge manufacturing, vertically integrated software, novel experience design, battery technology, and a culture of relentless iteration. 

Its arrival was an existential shock to China’s domestic automakers as it became the market leader in EV sales. Suddenly, local players like BYD, NIO, and Xpeng had a living benchmark for what world-class performance looked like, and how far they had to swim to compete.

Within just five years, China’s EV industry underwent a dramatic evolution, transforming from imitation to global competitiveness.

Local carmakers absorbed Tesla’s techniques like giga-casting, camera-based autonomous driving, advanced cell chemistries, and in-car immersive entertainment. 

While China has often been criticised for replicating foreign intellectual property, this transformation went far beyond imitation; it was accelerated osmosis. As Tesla sourced components locally, suppliers learned, adapted, and began offering those same capabilities to domestic OEMs. 

The catfish effect rippled across the value chain, from design to manufacturing to supply chains, and the entire Chinese EV ecosystem was upgraded to a higher sophistication.

By 2024, China was producing over 10 Mn electric vehicles annually, and Tesla had dropped to fifth place in market share. Chinese automakers like BYD have begun global expansion, threatening expanding market shares in the EU and SEA through irresistible value at impossible prices. 

The catfish had served its purpose: by entering the tank, it had made the sardines faster, smarter, and more competitive.

AI: The Catfish In India’s Technology Tank

AI is now performing a similar function for India, not as an intentionally imported entity, but as a new organising principle that will redefine the contours of Indian technology.

Just as Tesla forced China’s auto industry to confront its next frontier, AI is forcing Indian technology to re-examine its assumptions, operating models, and innovation pathways.

The Indian IT services industry, the startup ecosystem, the deep tech PSU community, academia, and the state all stand at an inflection point. Each must now reengineer its advantages to stay relevant in a world where intelligence, not effort, is the dominant production input.

Indian IT: From Services to Systems Transformation

India’s IT services industry, a $250 Bn engine employing over six million people, has built its success on process excellence and human capital scale. The AI narrative now threatens both moats. Generative models automate code generation, testing, documentation, and even parts of change management. 

The service advantage that defined Indian IT’s rise has to now evolve and become a GTM channel for enterprise transformation using AI.

The next decade demands reinvention, from “services vendors that execute projects” to “systems that think in real time.” The future Indian IT leader will be one that can train and deploy proprietary private models for enterprises, embed AI into client infrastructure, and monetise client data they are trusted with as a strategic asset.

The winners will build AI-native services firms, less about incremental human bandwidth deployment, more about algorithmic leverage. Those who treat AI as a cost-saving tool will be outcompeted by those who see it as a new capability engine that can increase billings.

For instance, Infosys recently announced Topaz Fabric, described as a “composable stack” of AI agents, services, and models designed to help enterprises derive faster and greater value. Human experts will “supervise, train and continuously contextualise the out-of-the-box AI agents to ensure accuracy, governance, and ethical alignment.”

Infosys developers have also produced more than 25 Mn lines of code using Gen AI, and the company has already executed over 2,500 Gen AI and more than 200 agentic AI projects for global clients. Infosys has built four small language models for use within its own business, and is aggressively training tens of thousands of its employees to classify them as “AI Builders”.

AI is the catfish that is forcing Indian IT to swim faster and shift from executing projects to building cognition-forward workforces for global enterprise. 

Startups: Building Full-Stack Supercharged Solutions

For India’s startups, AI opens a rare greenfield. We have seen over 40 tech IPOs from e-commerce and consumer brands to fintech and retail over the last five years, and this is still just the start of the full capital cycle of Indian innovation. 

Now, every software vertical from fintech, health-tech, logistics, and consumer internet is being rewritten around generative systems.

The next Indian unicorns will now not just “use AI”; they will be built on it.

Early-stage founders can now collapse development cycles, compress GTM timelines, and automate personalisation at scale. But they must also cross a higher threshold of defensibility: proprietary intelligence pipelines, capital efficiency, and user retention.

The AI-first Indian startup will utilise deep engineering capabilities, domain-specific data assets, and a clear thesis on privacy and governance. India’s venture ecosystem is already recalibrating to this reality, prioritising research-driven founders and capital efficiency over hype and imitation.

In short, AI is the catfish forcing Indian startups to evolve from app builders to full-stack innovators.

Deeptech: From Innovative Research to Rapid Commercialisation

India’s deep-tech ecosystem has the talent, but it lacked capitalisation and velocity. Historically, research and commercialisation have existed in silos, with PSU labs pursuing outdated tender-based requirements and government procurement increasingly reliant on global vendors. 

AI collapses that paradigm and is a wake-up call to end business-as-usual.

To change this, India is industrialising the process of local IP creation by connecting research institutions, government procurement, capital markets, and corporations through shared open infrastructure and outcome-based funding.

AI has shown that markets will reward the fast and the ambitious. It will penalise bureaucratic inertia. India’s deep-tech entrepreneurs and researchers must now build export-grade technologies that are globally competitive from day one.

AI is the catfish that demands radical acceleration in research-to-revenue velocity, and India is answering through action.

Academia: From Teaching to Research

India produces the world’s largest cohort of engineers, but relatively fewer inventors and entrepreneurs. Our academic system prioritises teaching over discovery. That model cannot hold in the AI age.

Universities must now operate as research engines with incentives tied to patents, publications, and commercial partnerships. Faculty should be co-founders, not just instructors. Government research grants must reward translational output, not paper counts.

If Tesla’s arrival forced China’s auto engineers to move from replication to innovation, AI can compel Indian academia to move from instruction to invention. 

The National Research Foundation and the National Deep Tech Mission must align around this and avoid losing the next generation of scientific leadership to foreign ecosystems.

Government: Incentivising Technological Sovereignty

Finally, India’s government faces the strategic dimension of the catfish moment and is now optimising for technological sovereignty. AI has shown that capabilities originating from decades of State-sponsored grants and convergent research can control information, geo-political influence, and competitive advantages.

The GOI must now design regulation and incentives that enable rapid local AI development while enhancing technological sovereignty.

It has to partner with its citizens, not compete with them through PSUs that win opaque tenders. 

It has to evolve government procurement and transform into a friendly first customer. Most importantly, it has to radically change the bureaucratic narrative, assert its trust in India’s innovators, and radically eliminate friction and barriers to innovation. 

India can turn AI into a competitive advantage, a model of assertive innovation for the new regime of challenged globalisation.

The Catfish Is The Trillion-Dollar Opportunity

AI is already transforming global value pools. By 2030, McKinsey estimates it could add $13 Tn to global GDP, and India alone could capture $500 Bn if it moves decisively. The opportunity is existential. The catfish has entered the tank.

The question is whether India’s tech ecosystem, with its scale, cost advantage, and talent diversity, can harness it as an accelerant.

Every transformation begins with discomfort. The catfish doesn’t arrive to be liked; it arrives to be feared and to consume. AI can be the force that will push us from profit optimisation to originality, from services to systems, from teaching to discovery, from regulation to strategy.

The moment demands not incremental adaptation but structural transformation to rebuild, re-skill, and re-imagine what Indian technology can become in the age of machine intelligence. 

The choice before us is stark: watch others define the current, or become the Catfish.