-
CENTRES
Progammes & Centres
Location
Amith Parameshwara and Arvind Gupta, “General-Purpose Technology and the Dominance of Nations,” ORF Special Report No. 261, May 2025, Observer Research Foundation.
Introduction: From Gutenberg to Algorithms
A General-Purpose Technology (GPT) is a technological innovation characterised by its pervasive applicability across sectors, continuous improvement over time, and the ability to spawn complementary innovations. Unlike single-purpose innovations, GPTs transform economies and societies by fundamentally altering how people live and work, reshaping the foundations of human activity and organisation. Throughout history, nations that master these transformative technologies gain advantages in economic development, military capability, and geopolitical influence.
In 15th-century Europe, Gutenberg's printing press fundamentally transformed information accessibility. Nations that embraced this technology experienced historic cultural and economic growth, shifting the balance of power across the continent. Meanwhile, the Ottoman Empire, once a beacon of innovation, declined in relative influence as it failed to adopt and integrate this revolutionary technology.
The 19th century witnessed Britain’s rise to global dominance, powered by the steam engine. At the time when Britain showcased its industrial might at the 1851 Great Exhibition in London, it was contributing 9 percent to the world's Gross Domestic Product (GDP) through coal and steam-powered factories and naval vessels.[1] This quintessential GPT enabled Britain to build global trade networks, expand colonial power, and establish Pax Britannica. Yet, by the early 20th century, Britain’s supremacy would wane as it failed to fully capitalise on newer technologies like electricity and internal combustion engines, allowing the United States (US) and Germany to surge ahead.
The late 20th century witnessed another pivotal shift when the US Department of Defence released the Global Positioning System (GPS) for civilian use in 1983. This technology, initially designed for military applications, blossomed into a GPT that gave birth to numerous innovations, from ridesharing to precision agriculture. American control of this technology reinforced US technological dominance in the digital era.
These historical examples illustrate the thesis of this report: The mastery of GPTs is invariably accompanied by national power and geopolitical might. Today, the world stands at the threshold of another transformative era, where the defining GPT is Artificial Intelligence (AI).
GPTs as Drivers of National Power: The Historical Playbook
GPTs reshape societies because they permeate across all sectors and industries. In the early 2000s, economist Carlota Perez identified a pattern where new GPTs emerge every 40 to 60 years, launching “techno-economic paradigm shifts”.[2] Their impact lies not just in their invention but in their diffusion, adaptation, and the development of supporting ecosystems.
Three foundational pillars explain how GPTs establish a nation’s dominance:
First, GPTs create powerful increasing returns to scale. As seen with Google’s AI systems, mass adoption multiplies benefits exponentially, which improves with each search query. Second, GPTs generate cross-sector spillover effects. British expertise in steam engines delivered benefits across multiple industries ranging from textiles to transportation. Similarly, today’s AI language models create spillover benefits in diverse fields, from drug discovery to materials science. Third, GPTs confer strong first-mover advantages. Nations that establish early leads develop self-sustaining technological ecosystems through accumulated expertise and industrial support. As economic historian Paul David notes, “Technological development predominantly proceeds along paths that are, for various reasons, highly predetermined.”[3]
Economic historian Joel Mokyr believed the GPTs created “tectonic shifts” in economic power—i.e., fundamental realignments that require more time to take root but, once established, remain impossible to reverse.[4] Historical examples demonstrate the transformative power of GPTs, such as the following:
The Internet Revolution was an extension of the IT revolution. Beginning as a closed military project in the 1960s within the Advanced Research Projects Agency (ARPA), it later diffused across academic institutions, private organisations, and the general public. A number of countries enjoyed the acceleration of internet adoption more than others. For example, the US benefitted from being the pioneer of the internet. It experienced enduring benefits in innovation (Silicon Valley became the epicentre of digital innovation), economy (US$2 trillion annual contribution from the tech sector, nearly 10 percent of GDP,[7] and a dominant share of global internet-based advertising and e-commerce markets), military and cyber power (sophisticated cybersecurity capabilities), and diplomatic power (global American standards set in tech policy, protocols, platforms, and digital infrastructure[8]). South Korea was also able to reap the benefits of internet adoption after it made heavy investments in broadband during the 1990s. It currently has the world’s highest Internet penetration and speed, contributing to approximately 11 percent of GDP (in 2016). [9]
India’s GPT Strategy: Leveraging IT Services for Cost Optimisation
India presents a unique case study of how nations can strategically engage with GPTs to create competitive advantages. While not an early developer of computing technology, India recognised the potential of the digital revolution and positioned itself as a global hub for IT services, demonstrating that even late adopters can find strategic niches within GPT ecosystems.
In the 1990s, as computing and telecommunications technologies matured, India leveraged its large, educated, English-speaking workforce to establish a formidable IT services sector. Companies like Tata Consultancy Services, Infosys, and Wipro pioneered the ’global delivery model’, enabling them to provide software development and business process outsourcing at much lower costs than their Western counterparts.
This strategic positioning had transformative effects, discussed in turn in the following paragraphs:
India’s approach demonstrates that nations can build power even when engaging with GPTs primarily as adopters rather than innovators. By identifying and exploiting comparative advantages, India is transforming a potential technological gap into an opportunity for national advancement.
AI as the Current Frontier of Inter-State Competition
AI currently stands at an inflection point similar to previous GPTs. Yet, compared to other GPTs, AI is considered to be far more transformational. While earlier GPTs amplified physical or communication capabilities or some form of utility, AI introduces cognitive capabilities and intelligence. It has self-improvement abilities, enables imagination because of its generative nature, and can even be autonomous. All these characteristics make AI a uniquely transformational force with deep and wide economic, social, and ethical implications. The competition for AI supremacy is, therefore, both an economic challenge and a contest with political ramifications.
AI's impact on national power manifests in a number of dimensions, including the following:
While AI could create 69 million new jobs, it is predicted that 83 million will lose their jobs, culminating in a 14 million job deficit worldwide. This disproportionately impacts low- to mid-skill workers.[16] Inequality also poses a risk threat, since more advanced economies and workers with higher credentials gain the most in the early stages of AI adoption.[17] Companies and countries that are already frontrunners in AI technologies will only widen the gap, resulting in a ‘winner takes most’ economy. Moreover, the already ongoing industry disruption and geopolitical rivalry for AI supremacy will unpredictably alter global economic relations. Driven by the quest for AI dominance, tech nationalism is rising, bringing about new tensions over data governance, compute infrastructure, and access to semiconductors, as well as injecting uncertainty concerning global trade and regulatory standards, economic equilibrium, and foundational policies.
The use of AI in military technology brings both advantages and challenges. Offensive operations can be conducted more efficiently with features such as real-time surveillance and rapid target identification and engagement processed with AI technologies. Take Ukraine, for example, which militarily participated in the Russia-Ukraine War by deploying unmanned naval drones with the capacity to return fire. The advancement in modern warfare is evident due to autonomous and AI-driven technologies. Similar offensive operations enabled by AI are being seen in the US in ‘Project Maven’, which focuses on automatic AI surveillance for faster thumb scoping. Decisions pertaining to confrontation are made faster as targets are found due to AI-driven processing of enormous pools of surveillance data.
Defensively, AI aids in threat detection and resource allocation. Machine Learning (ML) algorithms can predict potential threats and optimise mission planning, enhancing operational efficiency. However, reliance on AI also introduces vulnerabilities; AI-enabled systems are susceptible to cyberattacks, providing new entry points for adversaries to disrupt military operations.
The strategic asymmetry stems from the gap in the technological prowess of nations and the speed with which they adapt AI for military use. Nations that dominate the development of AI technologies stand to exploit a first-mover gap, changing the equilibrium of global security relationships for the worse. The situation gets even worse with information warfare—creating fake narratives to influence people’s views toward the target public is a work that is made easier through the use of AI. Employing advancements in military operations through the use of AI accelerates efficiency, but the lack of uniformity in employing such arms creates strategic and military asymmetries that require collaborative regulation to counterbalance the risks involved as a whole.
The increase in the number of AI technologies available amplifies the need for proper data governance. This drives institutional change because there needs to be effective policies and regulations for protecting data, such as the AI Act of the European Union, bodies for supervising ethics, and policies to counter discrimination on algorithms as is seen in the national approaches like the IndiaAI Mission, launched in 2024, which focuses on developing compute infrastructure, talent, and responsible AI ecosystems. Quicker adoption means faster and more profound changes to societal and government structures.
Global AI Race: National Strategies and Recent Developments
The global competition for AI leadership is intensifying, with global powers implementing ambitious national strategies. China continues to pursue its ‘Next Generation Artificial Intelligence Development Plan’, establishing a US$30-billion state-backed AI venture capital fund in 2023,[24] introducing regulatory frameworks for generative AI that maintain state control,[25] and accelerating domestic chip development despite US sanctions.[26]
The US has responded through the CHIPS and Science Act in 2022, allocating over US$50 billion for semiconductor manufacturing,[27] the National AI Research Resource Task Force's roadmap for democratising AI research access across academia and industry,[28] and international coalitions for trustworthy AI.[29] In January 2025, President Donald Trump signed Executive Order 14179, ’Removing Barriers to American Leadership in Artificial Intelligence’. This revoked the 2023 Biden order, ‘Safe, Secure, and Trustworthy AI’ and instructed agencies to stop enforcing guardrail rules that “impede U.S. dominance.” The order focuses on domestic R&D, increased export financing, and more flexible licensing for advanced chips, shifting federal policy from risk mitigation to a growth-first industrial policy. The current administration treats AI as a strategic asset, wagering that deregulation accompanied by market incentives will allow American leaders to surpass competition from China and the EU.
The EU has focused on balanced development through the world's first comprehensive AI regulatory framework (the AI Act of March 2024),[30] the EU AI Pact encouraging voluntary commitments from foundation model developers,[31] and a €7.5-billion Digital Europe Programme for AI and digital skills.[32]
Other countries have developed distinctive approaches: South Korea plans to invest US$7 billion in Korean-language models and specialised AI chips,[33] implement ‘K-Digital’ initiatives to train 100,000 AI specialists,[34] and create regulatory sandboxes for AI innovation.[35] Japan, for its part, has fostered the formation of domestic Large Language Models (LLM) company Sakana AI,[36] established a ¥2-trillion fund for advanced technologies,[37] and launched ‘AI Hospital’ initiatives;[38] meanwhile, India has accelerated AI development through its US$750-million Digital India GENESIS programmes,[39] the INR10,000-crore IndiaAI Mission for compute infrastructure,[40] AI Centres of Excellence in technical institutions,[41] and indigenous language models for Indian languages.[42]
Policy Implications: Learning from History
Nations that master GPTs obtain economic, military, and geopolitical advantages. The pattern has been consistent throughout history, from the printing press and steam engine to electricity, and the digital revolution: early and effective adoption boosts national power. Failure to adapt, like that of the Ottoman Empire and its defeatist attitude towards embracing the printing press or Britain’s later cynical approach towards adopting electricity in comparison to the US and Germany, leads to diminished influence.
With its cognitive capabilities and potential for self-improvement, AI is the defining GPT of the current era, one that can propel deeper transformations. The historical playbook presents a few strategic guide policies for nations aiming to capitalise on AI for geopolitical superiority:
Conclusion: The Imperative of AI
The emergence of AI as a GPT represents a historical inflection point with the potential to reshape the global balance of power. Just as the steam engine and digital technologies propelled nations to dominance throughout history, AI will be a primary determinant of national power in the contemporary world.
The stakes are extraordinarily high. Nations and organisations that fail to adapt to the AI revolution risk becoming marginalised on the global stage. Conversely, strategic AI adoption, coupled with thoughtful investments and innovation ecosystems, can enable nations to thrive in this new technological paradigm.
Mastering GPTs represents only part of the challenge. Equally important are the ethical, societal, and geopolitical dimensions of technological change. Navigating this complex landscape requires visionary leadership and bold decision-making.
Amith Parameshwara is a Doctoral Scholar at the Indian School of Business.
Arvind Gupta is Head, Digital India Foundation; and Adjunct Professor, Data and Digital Economy, IIT-BHU.
This report reflects the personal research of the authors and does not represent the views of the organisations they are currently employed with.
Endnotes
[1] Angus Maddison, The World Economy: Historical Statistics (Paris: OECD Publishing, 2003), pp. 91-92.
[2] Carlota Perez, Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages (Cheltenham: Edward Elgar Publishing, 2002), pp. 14-15.
[3] Paul A. David, “Clio and the Economics of QWERTY,” The American Economic Review 75, no. 2 (May 1985): 334.
[4] Joel Mokyr, The Gifts of Athena: Historical Origins of the Knowledge Economy (Princeton: Princeton University Press, 2002), 78.
[5] Paul Kennedy, The Rise and Fall of the Great Powers: Economic Change and Military Conflict from 1500 to 2000 (New York: Random House, 1987), pp. 357
[6] David A. Hounshell, From the American System to Mass Production, 1800-1932 (Baltimore: Johns Hopkins University Press, 1984), pp. 249
[7] D. Shepardson, “Internet Sector Contributes $2.1 Trillion to U.S. Economy: Industry Group,” Reuters, 2019, https://www.reuters.com/article/technology/internet-sector-contributes-21-trillion-to-us-economy-industry-group-idUSKBN1WB2QB/
[8] F. Daniel et al., The United States Has an Opportunity to Lead in Digital Development, 2021, https://www.csis.org/analysis/united-states-has-opportunity-lead-digital-development
[9] Y. Sawng et al., “ICT Investment and GDP growth: Causality Analysis for the Case of Korea,” Telecommunications Policy 45, no. 7 (2021), https://doi.org/10.1016/j.telpol.2021.102157
[10] Ahmed Sherif, “Tech Sector As a Percentage of Total Gross Domestic Product (GDP) in the United States from 2017 to 2023,” Statista, December 11, 2024, https://www.statista.com/statistics/1239480/united-states-leading-states-by-tech-contribution-to-gross-product/
[11] “India Preferred Partner in Global Technological Ecosystem: Nasscom President Rajesh Nambiar,” The Economic Times, March 20, 2025, https://economictimes.indiatimes.com/tech/information-tech/india-preferred-partner-in-global-technological-ecosystem-nasscom-prez-rajesh-nambiar/articleshow/119250343.cms
[12] B. Sai Ishwarbharath, “India’s ‘Insourcing’ Boom Does Not Spell Doom for Outsourcing, Tech Execs Say,” Reuters, March 1, 2024, https://www.reuters.com/world/india/indias-insourcing-boom-does-not-spell-doom-outsourcing-tech-execs-say-2024-02-27/
[13] KPMG, Exploring India’s Dynamic Start-up Ecosystem, December 2024, Bangalore, https://assets.kpmg.com/content/dam/kpmgsites/in/pdf/2024/12/exploring-indias-dynamic-start-up-ecosystem.pdf
[14] Atul Raja, “Assessing the Impact of Technology Adoption on the Performance of SMEs in India,” Wadhwani Foundation, May 11, 2023, https://wadhwanifoundation.org/assessing-the-impact-of-technology-adoption-on-the-performance-of-smes-in-india/
[15] McKinsey Global Institute, Notes from the AI Frontier: Modeling the Impact of AI on the World Economy, New York, McKinsey & Company, 2018, 6.
[16] The Centre for the New Economy and Society, Future of Jobs Report, World Economic Forum, May 2023, https://www3.weforum.org/docs/WEF_Future_of_Jobs_2023.pdf
[17] Sam Manning, “AI’s Impact on Income Inequality in the US,” Brookings, July 3, 2024, https://www.brookings.edu/articles/ais-impact-on-income-inequality-in-the-us/
[18] Marshall McLuhan, Understanding Media: The Extensions of Man (Cambridge: MIT Press, 1994), pp. 21.
[19] Lawrence Freedman, The Future of War: A History (New York: PublicAffairs, 2017), pp.143.
[20] RAND Corporation, Military Applications of Artificial Intelligence: Ethical Concerns in an Uncertain World, Santa Monica, RAND Corporation, 2020, pp.45.
[21] “AI Productivity for Public Sector: A C$700Bn Opportunity,” Global Government Forum, March 24, 2025, https://www.globalgovernmentforum.com/ai-productivity-for-public-sector-a-c700bn-opportunity/.
[22] Office of Research & Development, “Informatics. (n.d.),” U.S. Department of Veterans Affairs, February 6, 2025, https://www.research.va.gov/topics/informatics.cfm
[23] Ula Rutkowska, “Unlocking AI’s Potential in the Indian Public Service,” Apolitical, https://apolitical.co/solution-articles/en/unlocking-ais-potential-in-the-indian-public-service
[24] “China Establishes $30 Billion Fund to Accelerate AI Development,” Xinhua Economic News, April 11, 2023.
[25] Cyberspace Administration of China, “Generative Artificial Intelligence Services Management Provisional Measures,” August 15, 2023.
[26] Demetri Sevastopulo and Eleanor Olcott, “Chinese AI Groups Use Cloud Services to Evade US Chip Export Controls,” Financial Times, March 9, 2023.
[27] The White House, “CHIPS and Science Act,” August 9, 2022.
[28] National AI Research Resource Task Force, “The National Artificial Intelligence Research Resource: A Blueprint for Action,” January 2023.
[29] U.S. Department of State, “Joint Declaration: International Coalition for Trustworthy AI,” May 27, 2023.
[30] European Parliament and Council of the European Union, “Regulation of the European Parliament and of the Council Laying Down Harmonised Rules on Artificial Intelligence (Artificial Intelligence Act),” March 13, 2024.
[31] European Commission, “European AI Pact: Building Responsible AI Together,” December 8, 2023.
[32] European Commission, “Digital Europe Programme: €7.5 Billion of Funding for 2021-2027,” June 2021.
[33] Lee Joyce, “South Korea to Invest $7 Billion in AI to Retain Edge in Chips,” Reuters, April 9, 2024.
[34] Ministry of Employment and Labor (South Korea), “K-Digital Training Expansion Plan,” September 2022.
[35] Financial Services Commission (South Korea), “Regulatory Innovation for AI-Based Financial Services,” February 2022.
[36] Nikkei Asia, “Japan's Sakana AI Raises $30 Million to Challenge OpenAI,” Nikkei Asia, November 22, 2023.
[37] “Japan Approves ¥2 Trillion Fund for AI and Quantum Research,” The Japan Times, December 22, 2023.
[38] Ministry of Health, Labour and Welfare (Japan), “AI Hospital Vision 2025,” March 2023.
[39] Ministry of Electronics and Information Technology, “Digital India GENESIS (Gen-Next Support for Innovative Startups),” July 2023.
[40] Press Information Bureau, Government of India, “Cabinet Approves IndiaAI Mission with a Budget Outlay of ₹10,000 Crore,” March 7, 2024.
[41] Press Information Bureau, “Government Approved Rs. 990.00 Crore for Creation of Three AI-CoEs,” October 15, 2024.
[42] Ministry of Electronics and Information Technology (India), “Bhashini: National Language Translation Mission,” July 2022.
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.
Amith Parameshwara is a Doctoral Scholar at the Indian School of Business. ...
Read More +Arvind Gupta is the Head and Co-Founder of Digital India Foundation, a policy think tank focusing on digital inclusion, smart cities, and internet governance. He ...
Read More +