Economic Survey Advocates New Industrial Model Focused on Global Value Chain Integration
The Economic Survey, presented in Parliament on Thursday, has called for a fundamental shift in India's industrialisation strategy. It recommends moving away from traditional models centered on import substitution toward a new approach focused on deeper integration into global value chains (GVCs). This strategic pivot aims to enhance scale, competitiveness, and innovation while positioning India more prominently in the international economic landscape.
Building Strategic Resilience Through Diversification
According to the survey, India should prioritize building strategic resilience through diversification and developing depth of capabilities rather than pursuing complete self-reliance in every sector. This perspective emerges at a critical juncture when nations worldwide are reassessing their supply chain dependencies to reduce vulnerabilities.
The document highlights that economic interdependence, once seen as a pillar of mutual stability, has now become a potential vulnerability. Advanced and emerging economies are re-evaluating their exposure to concentrated supply chains, critical raw materials, and key technologies, often citing security concerns.
Five Pillars for Sustained Growth
The path to achieving Viksit Bharat @2047 requires continuous ascent within GVCs, supported by sustained reforms across five critical pillars:
- Ease of Doing Business: Streamlining regulatory processes to attract investment.
- R&D and Innovation: Enhancing technological capabilities and research output.
- Skilling: Developing a workforce equipped for modern industrial demands.
- Infrastructure & Logistics: Building robust physical and digital connectivity.
- Scaling up of MSMEs: Enabling small enterprises to participate in formal and export-linked supply chains.
Chief Economic Adviser V. Anantha Nageswaran emphasized that India has been patiently working on its economic transformation, with this survey outlining a clear roadmap for future growth.
Addressing the Innovation Gap
The survey underscores that innovation has become the primary currency of national security and geopolitical leverage. However, India faces significant challenges in this area, particularly in research and development expenditure.
Currently, India's Gross Expenditure on R&D remains stagnant at approximately 0.64% of GDP, far below the 2.5–5% range seen in innovation-led economies like the United States, China, and Israel. The deficiency is not due to a lack of scientific talent but stems from challenges in collaboration with the private sector and scaling up technological translation.
MSMEs as Crucial Players
Micro, Small, and Medium Enterprises (MSMEs) are identified as vital contributors to this new industrial journey. The survey envisions MSMEs evolving from micro-scale production toward deeper participation in formal and export-linked supply chains, requiring increased private sector investment in technology adoption, skills development, and quality systems.
Navigating Global Economic Statecraft
The resurgence of economic statecraft, distinct from traditional economic policy, is driven by several factors:
- The rise of ultra-nationalism rooted in claims of cultural superiority and anti-immigrant stances.
- Nations increasingly shying away from multilateral cooperation.
- A lack of updated global norms to govern competition, investment, and subsidies across different development models.
In this complex landscape, the survey calls for strategic resilience to be integrated into policy-making, including measures to remove quality controls and boost innovation. It also proposes bridging the critical gap between academic discovery and industrial commercialization to secure a position of leverage in global supply chains.
This comprehensive approach aims to transform industry into a key engine of future growth, ensuring India's competitive edge in an increasingly interconnected yet volatile global economy.
