India growth strategy: India enters this phase of global uncertainty with a stronger macroeconomic base than in earlier decades. Its potential growth rate appears close to 7%, backed by a sounder banking system, steady credit growth and renewed private investment. Capital formation remains above 30% of GDP. The foundations for sustained expansion are in place.
The harder question is external. India must now pursue growth in a world that is more fragmented, volatile and strategically competitive.
READ | Indian Ocean trade can anchor India’s growth aspirations
Policy thinking has moved beyond the old binary of protection and liberalisation. The focus is now on strategic resilience and strategic indispensability. India cannot retreat from global markets. It must build capabilities that make it harder to exclude from global supply chains, technology networks and trade flows. Domestic productive capacity is the condition for better global integration.
Several recent policy moves reflect this shift. The four labour codes seek to give firms greater flexibility while retaining worker protections. The insurance sector has been opened further to foreign investment. Private participation has been allowed in nuclear power generation. The government is also investing policy attention in critical minerals, semiconductors and shipbuilding. Export promotion has returned to the centre of policy through relief measures and longer-term incentives.
India growth strategy: Global trade and economic security
These initiatives are unfolding as trade itself changes. Multilateral frameworks are weaker. Bilateral deals, export controls, licensing regimes and subsidies now shape commercial relations. Supply chains are being redesigned around geopolitics. Economic security has become part of trade policy.
India has strengths in this order. Services exports, especially information technology and professional services, generate large foreign exchange earnings and connect India to global markets. But the goods trade deficit remains a vulnerability. India still depends on foreign capital to finance imports and on external sources for energy, fertilisers and critical inputs.
READ | Economic reforms: Finance ministry flags risks of chasing short-term growth
Developments elsewhere show the pace of change. China’s plan to turn Hainan into a free trade port is an experiment in creating a large low-tariff zone with liberal rules on trade, investment and mobility. Such moves can alter supply chains, tourism flows and corporate investment across Asia. Financial innovation adds another risk. Digital currencies and stablecoins could accelerate cross-border capital movements during periods of stress.
Atma Nirbharta and industrial capability
In this context, Swadeshi or Atma Nirbharta has acquired a different meaning. It is no longer best understood as isolation. It is about building domestic production, technology and innovation while staying connected to global markets. Indigenisation is both defensive and offensive. It protects production during disruptions and creates capabilities that strengthen economic sovereignty.
The risk lies in poor calibration. Strategic sectors may need targeted support. But protection cannot become a substitute for competition. Lower input costs help firms compete, but they do not automatically produce learning, scale or discipline. Once cost competitiveness improves, the constraint shifts to performance. Reliability, quality and coordination become decisive.
Manufacturing is central to this transition. Services can grow through specialised infrastructure and regulatory carve-outs. Manufacturing is embedded in domestic supply chains. It depends on firms, workers, logistics, power, regulators and local governments working together. Advanced manufacturing is therefore not just a sector. It is a test of institutional capability.
East Asia offers a useful warning. Japan, South Korea, Taiwan, Singapore, China and Vietnam used state support, export orientation and disciplined competition to accelerate industrial transformation. The key lesson is not intervention alone. It is the ability of the state to support firms, impose performance tests and withdraw protection as industries mature.
India faces a compressed timeline. Industrial capability, technological upgrading and global integration can no longer unfold sequentially. They must happen together. That raises the cost of policy mistakes.
State capacity and economic coordination
The central constraint is state capacity. Growth depends not only on policy design but on implementation. Strong state capacity requires administrative competence, coordination across ministries and credible regulation. It also requires the ability to learn.
Deregulation should therefore not mean state withdrawal. It should mean moving administrative effort away from routine policing and towards facilitation, coordination and problem-solving.
Firms and citizens also shape this capacity. Businesses invest, innovate and enter global value chains. Citizens influence institutions through expectations of fairness and participation in formal systems. Economic capability emerges from the interaction between the state, business and society.
Development also requires behavioural change. Global competitiveness demands delayed gratification. Investments in manufacturing, logistics and institutions impose costs now. Their benefits appear later. When short-term gains dominate, systems replace competence with shortcuts and learning with speed.
READ | India growth story faces deeper structural gaps
Human capital, finance and federal capability
Several enabling conditions will decide whether India can convert resilience into indispensability.
Human capital is the first. Competitive manufacturing and technology sectors require better education, vocational training and research capacity. Urban infrastructure and logistics are equally important for industrial scale.
Innovation systems need closer links between universities, public research institutions and industry. Environmental sustainability will also shape competitiveness as climate standards become part of global trade. Low-carbon production is no longer a peripheral issue for exporters.
Finance is another constraint. Large-scale manufacturing needs long-term capital, deeper bond markets and credible development finance. Regional disparities matter as well. National industrial strategy will succeed only if states have the governance capacity to implement it.
India has shown resilience and retains the potential for sustained growth. But becoming globally indispensable will require more than ambition. It will require patient capability building, stronger institutions and sustained cooperation between the state, firms and citizens. In a disorderly world, India’s most valuable strategic asset may be the ability to manage risk without losing long-term discipline.
Bhavika Khatter works at CUTS International as a Research Associate. Pradeep S Mehta of CUTS contributed.