Global research firm Bernstein has published an open letter to Indian prime minister (PM) Narendra Modi, laying out eight critical areas where the country must act decisively or risk falling into long-term economic dependence. The letter, authored by analysts Venugopal Garre and Nikhil Arela and dated 23 April 2026, follows a similar letter the firm wrote in 2019. While acknowledging India's progress—moving up global GDP rankings and choosing productive capital expenditure over subsidies—Bernstein warns that complacency now would be costly.
The AI Threat Is the Loudest Alarm
The report's sharpest warning is on artificial intelligence (AI). India's 10mn (million) to 15mn strong IT services, GCC (global capability centres) and BPO (business process outsourcing) workforce—the backbone of its aspirational middle class - faces direct exposure to automation. Yet, India owns no frontier AI models, unlike the US and China. Bernstein warns that if Indian data continues training global models without building domestic capability, India risks becoming a permanent consumer in the AI economy. The firm recommends that India support the development of domestic foundation models, build computing capacity and require global AI companies to list in India, with half the value shared with the public.
Agriculture: 42%-45% of Workers, Only 15%-16% of GDP
Bernstein calls agriculture India's clearest structural failure. Nearly half of the cultivated land remains monsoon-dependent. The rollback of farm laws has made reform harder but not less necessary. The firm calls for scaling irrigation, phasing down input subsidies worth ₹3 lakh crore-₹4 lakh crore annually, and urgently investing in storage and logistics infrastructure where India currently loses 5%-15% of agricultural output.
Energy: 88% Crude Import Dependence Is a Strategic Vulnerability
India imports nearly 88% of its crude oil; yet, the electric vehicle (EV ) transition has been delayed by hesitancy in policy. Distribution companies are sitting on losses exceeding ₹5 lakh crore to ₹6 lakh crore. Bernstein calls for a clear ICE (internal combustion engine) vehicle phase-out timeline and argues auto OEMs (original equipment manufacturers) described as ‘cash-rich’ do not need PLI (production linked incentive) support and should instead be held responsible for driving the transition themselves.
Manufacturing: Intent without Depth
Despite PLI schemes, manufacturing remains stuck at 16%-17% of GDP. Even in EVs, battery cells which account for 30%-40% of costs, are largely imported. The China+1 opportunity is real, Bernstein says, but India keeps entering industries too late. The firm calls for early identification of emerging sectors, robotics, automation, advanced materials and committing policy support before global supply chains are already formed.
Railways over Aviation
Bernstein criticises India's heavy investment in aviation, a sector with no domestic manufacturing base, while underinvesting in railways, where it holds a clear comparative advantage. With only one bullet train project underway, the firm argues India could fund one new high-speed rail corridor every year by redirecting the US$15bn (billion)-plus spent annually on employment guarantee schemes, which it says generate little productive value.
Cash Transfers: Crowding Out Capex
State-level cash transfer schemes to women alone now cost ₹1.7 lakh crore to ₹2.5 lakh crore annually across over a dozen states. Bernstein does not call for scrapping these, but warns that large, unconditional, election-timed transfers are squeezing capital expenditure (capex) budgets and risk locking India into a low-productivity equilibrium.
R&D: Ambition without Investment
At 0.6%-0.7% of GDP, India's research and development (R&D) spending is well below global benchmarks. Bernstein also takes a pointed jab at reservation-based hiring in academic institutions, warning that diluting merit will leave India technologically dependent on the US and China.
Taxation: High Burden, Weak Delivery
Public health spending at around 2% of GDP and education at around 3% remain inadequate. The firm proposes broadening the tax base by removing exemptions for political, religious, and sporting bodies, and floats the idea of phasing out all currency denominations above ₹10 to push formalisation.
Bernstein closes with a pointed conclusion: India does not lack capital, talent, or ambition. What it lacks is the willingness to make difficult decisions early. The window, the firm says, is still open, but it is narrowing.
