Indian Businesses Back Small Language Models to Power Future AI: Deloitte

Indian organisations are increasingly opting for small language models (SLMs) as they look for faster, more efficient, and targeted artificial intelligence (AI) solutions, according to Deloitte’s Tech Trends – India Perspective 2025 report.

These compact AI models are gaining popularity due to their ability to deliver personalised, responsive outputs while consuming less computational power—making them ideal for Indian enterprise environments.

SLMs + AI Agents + Simulation = Next-Gen Innovation

Merging AI Simulations with Domain-Specific Agents

The report notes that when SLMs are combined with task-specific AI agents and AI-driven simulations, they can create highly tailored solutions that improve user interaction and operational efficiency.

This fusion is part of a larger transformation where AI is becoming the core innovation enabler across industries in India.

“Across Indian organisations, AI is not just a trend but a powerful force weaving together technological advancements and driving India’s growth as a global leader in innovation. However, India must enhance its infrastructure, particularly high-performance computing and sustainable energy solutions, to accelerate growth while empowering its workforce through skill development and building ethical AI frameworks,”
— Abhrajit Ray, Partner and CIO Programme Leader, Deloitte India

AI as a Foundational Layer for Business Modernisation      

Rather than being a standalone tool, AI is emerging as a foundational force that drives breakthroughs across sectors. In India, this shift is producing real-time, intuitive systems built on the convergence of:

• Multimodal AI

• Spatial computing

• Advanced analytics

Together, these technologies are transforming how decisions are made and how systems interact with human users.

Hardware Innovation Resurges Amid GenAI Demands

AI-Centric Hardware Leads the Charge

Deloitte’s report also highlights the re-emergence of hardware innovation—a response to the increasing demands of generative AI (GenAI).

Previously seen as a commoditised layer, hardware is now evolving to become a critical pillar of AI performance and scalability. Specialised chips are being developed for:

• Power management

• Telecommunications

• Cryptographic acceleratio

Rise of Heterogeneous Computing

Heterogeneous computing, which involves combining GPUs and NPUs (neural processing units) on a single chip, is becoming essential for efficient, high-performance AI workloads. This approach is enabling hardware to move from a support role to a driver of AI innovation.

AI Applications Transforming Defence and Healthcare

Mixed Reality in Defence

In the defence sector, AI-driven mixed reality is enhancing operational readiness through immersive simulations. It also supports autonomous systems for quicker, more strategic decision-making.

Virtual Environments in Healthcare

In healthcare, AI is advancing diagnostic accuracy and improving surgical training through virtual environments that replicate real-world conditions for better preparedness and reduced risk.

Modern IT Systems Adopt Composable Architectures

AI is reshaping how businesses modernise their IT infrastructure. Deloitte’s findings show a move away from traditional monolithic systems to composable, decoupled architectures.

These agile systems are designed to:

• Embed AI directly into daily workflows

• Automate complex operations

• Ensure regulatory compliance

• Address evolving workforce needs

• Improve resource optimisation and cost efficiency

However, implementing such systems requires deep architectural transformation to maintain scalability, security, and long-term viability.

AI Empowering Tech Talent in IT Sector

Code Generation and Testing

In India’s booming information technology (IT) industry, AI is being widely adopted to assist in:

• Code generation

• Software testing

• Automation of development workflows

This not only reduces manual effort but also boosts productivity, driving a shift away from traditional virtualisation models toward scalable, AI-enabled solutions.

Conclusion

Deloitte’s Tech Trends – India Perspective 2025 paints a compelling picture of how Indian enterprises are rapidly evolving by embracing small language models (SLMs) and AI-driven innovations. The shift toward compact, task-specific models highlights a growing preference for scalable, cost-effective, and high-performance AI solutions.

As AI becomes deeply embedded in core business functions—from software development to defence simulations and healthcare diagnostics—Indian organisations are not just keeping pace but actively leading transformation across sectors.

However, realising the full potential of this AI-driven future requires significant investments in infrastructure, skill development, and ethical frameworks.

With a strategic focus on hardware innovation, composable architectures, and multimodal capabilities, India is well-positioned to become a global innovation powerhouse.

As businesses modernise and talent adapts, AI will continue to reshape India's digital economy, driving agility, productivity, and inclusive growth. The coming years promise a dynamic interplay between technology, policy, and people in building India's AI-led future.