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New law to impact Indian firms offering AI products to the European Union

31 May 2024

Last week, the Council of the European Union approved the world’s first law regulating AI development, the European Union Artificial Intelligence Act.

The EU’s new AI Act, expected to come into effect by June end, will raise compliance expectations and associated costs for Indian firms selling AI systems in Europe. Companies will have six months to conduct a risk assessment to ascertain the category of their AI systems and prepare for compliance.

While the generic AI applications will get a year to comply, the high-risk systems must fully comply within three years. The Act will ban any AI applications posing unacceptable threats within six months of implementation.

Indian SMEs offering AI products to the EU market at reasonable rates are worried about losing their competitive edge. Becoming and staying compliant will demand excessive costs and administrative resources. Non-compliance can attract penalties of up to €1,50,00,000 or 3% of the turnover.

The new Indian government may pass the Digital India Act, replacing the twenty-five-year-old IT Act. It may also regulate AI.

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