Shaping the AI Sandbox Ecosystem for the Intelligent Age 2025

Executive summary Artificial intelligence (AI) is rapidly transforming economies and societies, with advances in generative models, intelligent agents and autonomous systems opening new frontiers for growth. This rapid evolution presents countries with a dual imperative: to accelerate innovation while ensuring it remains responsible, inclusive and aligned with the public interest. India is uniquely positioned to lead this transformation. With strong digital public infrastructure (DPI), a vibrant start-up ecosystem and a large, multilingual population, the country offers an ideal testbed for building and scaling AI solutions that address both domestic priorities and global challenges. However, India continues to face a few structural challenges – including limited access to localized datasets and compute infrastructure, a lack of standard validation frameworks and constrained support for early-stage start-ups. AI sandboxes offer a timely solution to address the most critical of these challenges. They provide secure, controlled environments where innovators can test, validate and refine AI solutions using real- world data, infrastructure and regulatory guidance. Globally, such sandboxes have been deployed in regulatory, innovation-focused and hybrid formats across sectors such as healthcare, finance and education. This white paper presents a comprehensive framework for catalysing the establishment of AI sandboxes. The framework has been developed through consultations with more than 20 experts, a multistakeholder workshop with over a dozen AI-first start-ups and global benchmarking of best practices. It comprises two key components: 1. A strategic framework that outlines five core layers of the AI sandbox ecosystem – infrastructure, data, models, innovation and governance – each embedding enablers for the creation of AI solutions and guardrails for responsible deployment.2. An operational framework that defines four key phases for implementation: –Defining the objectives and scope aligned with national and sectoral priorities –Establishing multistakeholder governance and access protocols –Designing and developing sandbox components, including datasets, compute infrastructure, models and validation tools –Establishing the AI sandbox, tracking outcomes and scaling through structured adoption and commercialization pathways The framework directly addresses five systemic challenges in India’s AI ecosystem: (1) data accessibility and governance; (2) access to compute infrastructure; (3) model affordability and contextual representation, regulatory uncertainty and lack of awareness around validation mechanisms; (4) limited avenues for market access; and (5) limited ecosystem enablement. It positions sandboxes not merely as pilot environments but also as long-term national platforms that propel responsible AI innovation and deployment. The paper concludes with a call to action for key stakeholders. The government can play a catalytic role by funding pilots and enabling national coordination. Industry has an essential role in contributing infrastructure, expertise and mentorship. Academia is critical for driving validation efforts and leading capacity-building initiatives. Start-ups are central to the sandbox’s success through active participation, continuous feedback and co-development of scalable, real- world solutions. Regulators provide crucial oversight and guidance to shape safe and responsible experimentation environments. Together, these efforts can help establish AI sandboxes as a cornerstone of India’s AI strategy – positioning the country as a global leader in inclusive, scalable and trusted AI development.This paper presents a national framework to enable responsible, inclusive and scalable AI innovation through controlled development and testing environments. Shaping the AI Sandbox Ecosystem for the Intelligent Age 4