Key Points

The Bernstein report titled 'OpenAI, Perplexity's India push -- a wake-up call for Indian AI', dated September 4, noted, "If Chinese firms re-enter, it will further erode whatever digital space remains for Indian players."

"The deck is stacked by predatory capital and import dependency for digital hardware -- India risks being reduced to a mere digital marketplace, not a creator," it continued.

Foreign LLMs (large language models) have made inroads India and with the recent improvement in India-China relations, the Bernstein report wandered, "who knows if, in the future DeepSeek can come up with an offering."

Dominance of foreign tech in India and the absence of a strong homegrown ecosystem, India currently has little leverage to curb foreign influence in its traditional digital sectors, Bernstein argued.

Talking about the US, the Bernstein report noted that US tech, particularly AI, has a huge dominance in India and the recent 'predatory' pricing by some may risk the scalability of India's local ecosystem, at a time it is looking to build its own indigenous AI solutions.

It noted that even as the government calls for Indian firms to build indigenous solutions, the reality is "stark".

"...every major digital platform powering India -- search, messaging, social media, and commerce -- is already under US control," the report said, setting the context of its argument.

Citing the instance where India banned Chinese app TikTok a few years ago, the Bernstein report argued that it was the US social media app Instagram that benefited.

"Recall what happened after the TikTok ban: it wasn't an Indian challenger that rose, but Instagram swept up millions of users."

The idea of building homegrown rivals is in the realm of imagination now, it continued.

"...funding and regulatory support are in short supply, while global tech giants deploy billion-dollar war chests. Consequently, most talent capable of building such platforms prefers to do it for the US firms," it opined.

The amount of funds India earmarked for a homegrown LLM is quite low compared to US and China, it said, suggesting a need for more investments.

"India's AI investments lag those of US and China by a distance, and are even behind some smaller economies," it said.

Against this backdrop, Bernstein suggested that India should explore bold rules, such as requiring a minimum 51% public Indian ownership (with genuinely broad-based equity) so that the country captures a fair share of AI's value creation.

"Instead of celebrating the flood of "free" US AI platforms driven by aggressive pricing, policymakers should view this as a wake-up call. If China can shield its tech industry and still maintain lucrative trade and manufacturing ties with the US, what's stopping India from taking similarly decisive action to protect its digital future? It's time to prioritize long-term national interests over short-term excitement," the report read.

Also, it suggested that India can continue with Data Protection measures that will warrant data localization for global tech giants, and will force global AI companies to move onshore, setting up India offices and data centres.

- ANI