Jobs, AI, Subsidies: Bernstein’s Open Letter To PM Modi Raises Red Flags For India’s Growth

Brokerage firm Bernstein has written an open letter to Prime Minister Narendra Modi, flagging risks around jobs, artificial intelligence (AI) and rising subsidies.

Employment stress, weak manufacturing absorption, subsidy-heavy politics and limited AI Preparedness are the major areas of concerns for the long-term prospect of the country.

The letter authored by Venugopal Garre and Nikhil Arela, however, noted that manufacturing reflects structural gaps despite good intent.

“While initiatives such as PLI have created momentum, manufacturing’s share of GDP remains – 16-17% and employment continues to be concentrated in low-productivity informal services,” it added.

The letter cautioned that supply chains remain shallow, talent in advanced manufacturing

is constrained and execution timelines are often slower than competing economies.

It said that approach needs to shift toward early identification of emerging sectors – such as, automation, robotics, advanced materials, AI-integrated manufacturing.

AI Raises Fresh Concerns Over Jobs

The letter flags employment as a growing concern amid the rapid rise of generative AI. India’s services sector—especially IT and BPO—has long driven middle-class expansion, but a significant portion of these roles now face automation risks.

It cautions that India could end up as a “consumer” rather than a “creator” in the global AI landscape, with most of the economic gains accruing to countries like the US and China.

Manufacturing May Fall Short on Job Creation

The authors also question whether manufacturing can absorb excess labour at scale. Despite the buzz around the “China+1” shift, private investment remains limited and has not translated into the expected surge in factories or employment.

As a result, a large share of the workforce is drifting towards low-paying urban services or unstable self-employment, raising concerns about the overall quality of jobs being created.

Agriculture Continues to Lag

Agriculture remains a structural weak spot, employing roughly 42–45% of the workforce while contributing only 15–16% to GDP.

The letter argues that recurring policy responses have failed to address deeper inefficiencies. It calls for expanding irrigation, cutting dependence on subsidies, and improving storage and logistics to boost productivity and farmer incomes.

Energy Dependence Still a Vulnerability

On the energy front, the letter points to inefficiencies in the power sector and India’s heavy reliance on crude oil imports, which meet about 88% of demand.

It recommends accelerating the transition to electric mobility and setting a clear roadmap to phase out internal combustion engine vehicles, stressing that true energy security requires both lower import dependence and systemic reforms.