Shaping the AI Sandbox Ecosystem for the Intelligent Age 2025

The other key features of the EU AI Act 2024 relevant to this study are outlined below. In this section, AI regulatory sandboxes are referred to as AIRS for brevity: a. How many AIRS? It is appropriate to establish an AIRS at the national level and additional AIRS at the subnational level in AI-producing countries. The Federal Government may establish an exclusive AIRS for validating AI solutions designed for the public sector. b. Exit report: The competent authority of the AIRS shall issue an “exit report” to the developer or start-up whose solution has passed all the test criteria established by the AIRS. This exit report, serving as a form of validation certificate, can be used as a credential to support product marketing and outreach. c. Equitable access to AIRS services: Clear and transparent eligibility criteria shall be prescribed for developers and start-ups to enter the AIRS. The time limit for remaining in the AIRS may be determined based on the complexity of the problem being addressed and the current stage of the solution design. d. Free service: The services of AIRS shall be provided free, except for the cost of specialized materials required for testing a specific use case. e. Facilities at AIRS: AIRS shall have the infrastructure, tools and capabilities for testing, benchmarking, assessing and explaining the dimensions of AI systems – accuracy, robustness, trustworthiness and cybersecurity – besides measures to investigate risks. f. Personal data processing: Personal data collected by an agency for some purposes may be used for AI systems in AIRS, subject to certain conditions, which stipulate that public interest should be served by the proposed AI system; for instance, relating to public safety, public health, healthcare, transportation, critical information infrastructure, networks, climate action, energy sustainability and, especially, the efficiency and quality of public administration and public services. g. Monitoring systems shall be put in place. h. Personal data must be processed in confidential computing rooms.Most of the operational provisions of the Act are useful to countries seeking to establish an AI sandbox ecosystem. Depending on their core objective, sandboxes worldwide can typically be classified into three categories:6 Regulatory sandboxes Provide a supervised space to pilot AI solutions under the guidance of regulators, enabling the early identification of risks and compliance pathways before full-scale deployment. Particularly useful in sectors such as finance and healthcare, where safety and compliance are critical. Innovation (or operational) sandboxes Offer shared access to data, compute capacity and other resources, enabling rapid prototyping and collaborative development of AI applications. Especially relevant in sectors such as agriculture, education, logistics and MSMEs, where rapid experimentation can unlock scalable solutions. Hybrid sandboxes Combine the benefits of innovation and regulatory models – promoting experimentation while ensuring alignment with ethical, safety and policy frameworks. Well suited to integrated domains such as digital health, fintech and smart governance, where both agility and oversight are necessary. Globally, countries such as Norway,7 Malaysia,8 Brazil,9 Singapore,10 the United Kingdom11 and Spain12 are already adopting sandbox models to advance innovation and safeguard the public interest. AI sandboxes have the potential to act as critical enablers for accelerating India’s AI innovation while embedding trust, safety and inclusiveness into the ecosystem. This paper examines their relevance in the Indian context and proposes a framework to guide the establishment and operationalization of AI sandboxes.1 2 3 Shaping the AI Sandbox Ecosystem for the Intelligent Age 7