India risks becoming permanently dependent on foreign artificial intelligence (AI) models unless it develops its own sovereign large language models (LLMs), according to a report by global brokerage Bernstein. The report argues that while building AI applications and data centres has value, India's long-term competitiveness depends on owning the foundational AI models that power them, especially as advanced AI technologies face growing restrictions globally.
AI needs its own 'DeepSeek moment'
Bernstein argues that India cannot build its AI future on borrowed technology. The brokerage likens today's AI race to the evolution of defence technology, where access to advanced capabilities is often tightly controlled by the nations that possess them.
The report warns that India could eventually find itself locked out of the latest AI models during geopolitical tensions, leaving domestic companies and institutions dependent on older technologies while competitors in the US and China continue to advance. It describes AI as the next 'fighter jet', a strategic capability that nations are increasingly unwilling to share without restrictions, pointing to recent US curbs on frontier AI models as evidence that cutting-edge AI is being treated as a strategic national asset rather than a freely available technology.
India needs AI sovereignty, not just AI applications
According to Bernstein, India's focus should extend beyond developing AI-powered applications or chatbots. Instead, the report argues the country must own the 'intelligence layer', the foundational LLMs that underpin enterprise software, defence systems, healthcare, finance and scientific research.
The brokerage cautions that relying entirely on foreign LLMs exposes India to long-term strategic risks. If access to these models is restricted or delayed during periods of geopolitical friction, Indian businesses may be forced to build products on older-generation AI systems, making them less competitive globally.
Why the IT services playbook may not work this time
Bernstein also questions whether India's successful IT services model can be replicated in artificial intelligence. Historically, Indian technology companies excelled by building software and services on platforms developed elsewhere. However, the report argues that AI shifts value creation towards ownership of foundational models rather than application-layer development, meaning companies that depend entirely on foreign LLMs could lose their competitive edge as AI becomes the core engine powering digital services.
Why India has fallen behind
Bernstein says India's absence of a globally competitive LLM is largely structural rather than the result of a deliberate policy choice. Unlike the US and China, India has historically built a services-led technology industry instead of large consumer internet platforms that generate the massive proprietary datasets needed to train frontier AI models.
The report also notes that India's AI Mission spreads resources across multiple priorities, including compute, research, startups and applications, leaving relatively limited funding specifically for foundational model development. Unless India prioritises sovereign LLM capabilities, Bernstein warns the country risks remaining dependent on foreign AI providers for the core intelligence layer that will increasingly power businesses, governments and critical infrastructure.
