Artificial intelligence is increasingly transforming the preservation, circulation, and economic value of traditional knowledge and cultural heritage in India. In the Indian context, traditional knowledge includes indigenous practices, oral traditions, medicinal systems, local languages, folk arts, and artisanal skills transmitted across generations, while cultural heritage includes both tangible and intangible forms sustained by communities and institutions. AI has begun to influence manuscript preservation, language technologies, digital archives, handicraft visibility, and heritage-based tourism, thereby contributing to the emergence of a new cultural economy. At the same time, this transformation should not be interpreted as uniformly beneficial. The same technologies that expand access can also detach cultural expressions from community control, flatten historical context, and convert living traditions into marketable data. This paper argues that AI can strengthen India’s cultural economy only when it is guided by ethical governance, community participation, and culturally sensitive policy frameworks.