India could “under-deliver on its potential” if the country does not undertake urgent structural reforms in jobs, manufacturing, and innovation, said global brokerage firm Bernstein in an open letter to Prime Minister Narendra Modi. Authored by Venugopal Garre and Nikhil Arela, the letter highlighted short- and long-term risks for the Indian economy, ranging from artificial intelligence and energy dependence to freebies.One of the key concerns highlighted in the letter was employment amid the emergence of artificial intelligence.The brokerage said that India risks becoming a consumer of AI, as most innovation in the technology is taking place in the United States and China.
It warned that if India’s data continues to be used to train artificial intelligence models, the country could be reduced to just an AI consumer instead of aspiring to play a key role in shaping the technology.
“India does not own frontier AI models… If Indian data continues to be used to train global models without building domestic capability, India risks becoming a permanent consumer,” it said.Bernstein said that the technology poses a direct risk to professionals engaged in IT and BPO services, which have been key drivers of the emergence of the Indian middle class.It questioned whether the manufacturing sector would be able to absorb displaced labour at scale, even as private capital expenditure remains selective. The much-hyped China+1 shift has also been slower to translate into jobs. “Ultimately, where and how a country deploys its people defines its long-term trajectory,” it said.“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?” it added, raising concerns about meaningful employment.The brokerage highlighted that agriculture, which still employs about 45 percent of the country’s working population, contributes only 15 percent to the economy.It said that reforms in the sector should not slow down, even if the three farm laws could not be implemented.It called for a reduction in farm subsidies and expansion of irrigation services to support the sector.The brokerage also flagged India’s energy dependence and inefficient power distribution.It called for a faster transition to electric mobility to ease import dependence.The brokerage also raised concerns about rising cash transfer schemes by states, estimating annual outlays of Rs 1.7-2.5 lakh crore.“For an investment-starved emerging economy, it is a very expensive way to buy growth,” it said.The brokerage warned that such spending crowds out infrastructure investment and adds to inflation risks.