A recent report by the global financial services firm Bernstein is advising Indian digital creators to be cautious about the potential re-entry of Chinese tech companies into the Indian market. The report, titled 'OpenAI, Perplexity's India push -- a wake-up call for Indian AI' and dated September 4, 2025, highlights that improved India-China relations could pave the way for Chinese firms to regain access to Indian consumers.

Bernstein's analysis suggests that if Chinese companies are allowed back into the Indian digital space, it could further diminish the already limited opportunities for Indian players. The report expresses concern that India risks becoming merely a digital marketplace rather than a creator, facing challenges from "predatory capital" and import dependence for digital hardware. This situation, according to Bernstein, could hinder the development of a strong homegrown digital ecosystem in India.

The report also addresses the dominance of US tech, particularly in the field of AI, within India. Bernstein suggests that the "predatory" pricing strategies employed by some US companies could jeopardize the scalability of India's local ecosystem, especially as it aims to cultivate indigenous AI solutions. Despite the government's call for Indian firms to develop local solutions, the reality is that major digital platforms in India, including search engines, messaging apps, social media, and e-commerce platforms, are largely controlled by US companies.

Bernstein's report references the ban on Chinese app TikTok a few years ago, noting that it was the US-based Instagram that benefited most from the ban, not an Indian competitor. This outcome highlights the difficulty in building homegrown rivals in the current digital landscape.

The firm points out that venture capitalists in India seem to be focusing on building applications instead of foundational models. Bernstein analysts believe this strategy carries the risk that specialized vertical solutions become ineffective once global tech giants acquire enough knowledge to replicate their functionality. They also cautioned that Indian tech continues riding "the wave of labour arbitrage" and now faces AI-driven disruption.

Overall, the Bernstein report paints a sobering picture of India's digital landscape, warning of the dangers of over-reliance on foreign tech companies and the potential consequences of Chinese firms re-entering the market. It emphasizes the need for India to strengthen its domestic digital ecosystem and develop indigenous solutions to avoid becoming a mere consumer in the global digital economy.