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“If Indian data continues to be used to train global models without building domestic capability, India risks becoming a permanent consumer in the AI economy,” the brokerage firm observed.
A message reading 'AI artificial intelligence', a keyboard, and robot hands are seen in this illustration.(REUTERS)“Does the next leg of our growth story create more engineers, product builders and innovators, or does it mostly create more drivers, delivery staff and domestic help?” This is the question that India currently faces according to an open letter written to Prime Minister Narendra Modi by global equity research and brokerage firm Bernstein.
The 12-page letter highlights policy gaps and suggests reforms that can help India compete better in global markets whilst sustaining its economic growth, especially in the post-AI world.
“In artificial intelligence, the risk is not visible today, but it is likely to be profound over time,” the letter underlines. It recommends that any global tech company offering AI models should be pushed to list in India with half the value shared with the public, in order to prioritise and protect domestic development of these models.
The letter also warns against the direct automation of a meaningful share of roles in IT services, GCCs and BPOs which employ 10-15 million people — a workforce that anchors the aspirational middle class and drives consumption. Besides, most of the surplus value in AI models, platforms, and IP remains concentrated in the US and, to an extent, China.
“If Indian data continues to be used to train global models without building domestic capability, India risks becoming a permanent consumer in the AI economy,” the brokerage firm observed.
Self rel-AI-nce
Even as India is positioning itself as a hub of data centres by attracting large investments, it hasn’t ensured that the technology or created value stays within India, Bernstein contends. Without addressing the reliance on imports (say high-performance servers, AI chips or GPUs, cooling systems, etc.), India might be acting more as a physical host for foreign technology rather than a central hub of AI innovation.
More importantly, India does not own frontier AI models, unlike the US and China — a reflection of the absence of first generation technology platforms in the country historically.
The brokerage firm cautions that US-based Big Tech will dominate the AI landscape by controlling the platforms and pricing, while only the highly specialized AI applications will survive outside their control. This will inevitably puts India’s IT services and BPO sectors, which are a key driver of income mobility, at risk.
To avoid this, Bernstein recommends a more protectionist approach, somewhat on the lines of China. It suggests the development of AI models and AI infrastructure within India while implementing strict data localisation laws which ensure India retains control over its data and can monetise it.
Build capacity to evade jobless growth
The brokerage firm’s letter to PM Modi also appeals for a shift towards early identification of emerging sectors— such as automation, robotics, advanced materials, AI-integrated manufacturing— and committing capital and policy support before global supply chains are fully formed.
“Without this, the cycle of late entry and prolonged catch-up will persist,” the firm observes, as it calls for urgent capacity building lest new entrants to the workforce quickly end up in low-end urban services or precarious self-employment or find themselves out of jobs. The letter points out that surplus labour in agriculture is still struggling to find productive alternatives.
“Ultimately, where and how a country deploys its people is what defines its long-term trajectory,” Bernstein notes
English (US) ·