The Economic Survey 2025-26, released on January 29, 2026, has raised significant concerns about the investment behavior of Indian corporations, pointing to a relative lack of appetite for long-term risk absorption and global competitiveness. The document, which was presented in Mumbai, underscores that this trend is occurring in a global trading environment marked by export controls, technology denial regimes, and carbon border mechanisms, signaling what it terms the end of naïve globalisation.
Swadeshi: A Defensive and Offensive Policy Lever
In this context, the Survey declares that Swadeshi is inevitable and necessary. It argues that in an era where access to inputs, technologies, and markets cannot be assumed to be frictionless or permanent, Swadeshi serves as both a defensive and offensive policy tool. This approach aims to ensure continuity of production during external shocks and build enduring national capabilities that reinforce economic sovereignty.
Corporate Culture and Risk Externalization
The Survey notes that Indian corporates often exhibit a preference for regulatory arbitrage, protected margins, and firm-specific accommodations over productivity enhancement or scale competition. This behavior is described as rational in an environment where downside risks are socialized through mechanisms such as bailouts, banking forbearance, tariff protection, or retrospective renegotiation.
However, this tendency to externalize risk to the state does not pressure for higher state capacity; instead, it generates demand for discretion. The document emphasizes that a well-designed regulatory architecture alone is insufficient to generate higher state capacity and must be supported by the corporate sector.
Historical Comparisons and National Transformation
Drawing comparisons with post-war economies like America, Germany, Japan, and East Asia, the Survey highlights that successful corporate histories in these regions were marked by firms that:
- Invested ahead of immediate returns
- Treated technological capability and workforce upgrading as civic obligations
- Derived legitimacy from strengthening national resilience and export competitiveness
In contrast, Indian corporates are characterized by short capital allocation horizons, low R&D intensity, and concentration in sectors like real estate, regulated industries, or quasi-monopolistic areas. This reflects not just cultural factors but governance structures such as family control, succession orientation, and underdeveloped long-horizon capital.
Challenges in Private Investment
The Survey points out that private capital expenditure (capex) remains a pain point for the economy, despite government efforts to revive consumption demand. While central government capex as a share of GDP has risen from 2.6% to 4% between FY20 and FY25, private investment continues to be subdued. The document warns that when firms do not require fast courts, skilled labor at scale, or predictable regulation to generate returns, they cannot function as a forcing mechanism for institutional upgrading.
Policy Implications and Future Directions
The Economic Survey concludes that the policy question is no longer whether the state should encourage Swadeshi, but how to do so without undermining efficiency, innovation, or global integration. It calls for a balance between manufacturing and imports, cautioning that Swadeshi-oriented policies in the past have sometimes led to complacency and inefficiency due to a lack of global competition.
Ultimately, the Survey asserts that national transformation is most durable when business leaders see themselves not merely as beneficiaries of growth but as trustees of a larger developmental project, echoing the ethos of post-war industrial successes abroad.
