Business Standard

EU’S AI law may increase cost burden on firms

- ASHUTOSH MISHRA New Delhi, 15 March

The European Parliament’s approval of the world’s first rules to govern artificial intelligen­ce (AI) sets a clear regulatory framework, and the Indian companies conducting business or catering to clientele in the European Union (EU) will need to adhere to it, experts said.

The Artificial Intelligen­ce Act was passed by lawmakers on Wednesday. It lays down rules and guidelines for specific risks associated with the use of AI in areas like biometric authentica­tion, facial recognitio­n, high-risk domains such as healthcare and deep fakes. The experts believe the comprehens­ive framework will increase the cost and compliance burden of these companies.

“The regulation will require Indian companies to adjust their AI systems to meet the prescribed standards, undergo conformity assessment­s, and implement risk management measures if they are in the higher risk categorisa­tion. The compliance costs and regulatory burden could be significan­t, especially for smaller firms,” said Somshubhro Pal Choudhary, Cofounder, Bharat Innovation Fund

(BIF) — a deep techfocuse­d venture capital firm.

Though the Act will require companies to assess their AI models to determine risk classifica­tion, it also allows sufficient time for compliance, said Jameela Sahiba, senior programme manager of AI vertical, The Dialogue. “The Act allows time for compliance, as it will come into force twenty days after its publicatio­n in the official journal and will be fully applicable 24 months thereafter,” she said. Its support for innovation through regulatory sandboxes can be leveraged by Indian startups to develop and test responsibl­e AI solutions before market entry, she added.

Experts are of the opinion that though the risk-based approach is perhaps applicable to the EU regions, each country will look at its own requiremen­ts.

“While it will definitely offer lessons to India, it is important to note that India's diverse socioecono­mic context, technologi­cal infrastruc­ture, and regulatory framework differ significan­tly from that of the EU. In conversati­ons around potential AI regulation so far, the Indian government has stressed a ‘user-harms perspectiv­e’ to AI regulation,” Sahiba said in response to a question on India.

“This emphasis on risk categorisa­tion establishe­s a clear regulatory framework. High-risk AI systems are set to face stringent regulation­s, including rigorous risk assessment­s, human oversight, and explainabi­lity requiremen­ts to ensure user trust,” she said. The regulation defines highrisk systems as something that can cause potential harm to health, safety, fundamenta­l rights, environmen­t, democracy and the rule of law.

Experts say that though the Riskbased approach is applicable to the EU regions, each country will look at its own requiremen­ts

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