Growth by design: India’s rise hinges on its industrial policy

At a time when turbulence and violence define a fractured and unpredictable world, “industrial policy” may sound technical, even dull. But beneath the jargon lies a question of national security. As supply chains turn into weapons, depending on others for critical technologies leaves countries dangerously exposed.

It is thus precisely this neglected idea of what constitutes industrial policy that could determine whether India secures its future or remains exposed to strategic weakness, for it visualises the framework that guides entrepreneurs’ views on investment, innovation, and jobs. A thoughtful industrial policy could be decisive.

It needs recalling that India’s liberalisation in 1991 came just as the Washington Consensus was rising. With the Cold War over, global institutions pushed deregulation, privatisation, and financialisation as the universal recipe for growth. India, fresh out of a balance-of-payments crisis, embraced this model. Financial reforms and strong regulators followed. These reforms delivered undeniable growth but, at the same time, entrenched informality, widened inequality, and weakened domestic industries, as the real-sector governance model remained overlooked and thus unreformed.

Our biggest export became manpower, skilled and unskilled, through both legal and precarious channels. Today, even Washington has turned away from its consensus, reshoring supply chains and prioritising domestic manufacturing. If the architects of globalisation have shifted course, we too must rethink our path.

Our post-liberalisation growth has been undoubtedly impressive, but manufacturing has lagged. Millions remain stuck in low-tech, insecure jobs. Female labour participation is just 33.7%, far below the global average of 50%. That is not just a statistic; it is half our talent pool lying unused. Much of our high-tech output is still assembly-based, with critical components imported, mostly from China. This dependence persists despite India’s recognised research strength in AI, robotics, and quantum computing. The Australian Strategic Policy Institute ranks India among the top five in over 65 critical technologies based on a long-term study of scientific papers published in globally ranked journals. The problem is clear: our firms have not yet scaled knowledge to industrial production.

Industrial policy spells an approach to governance. It is resilience, jobs, and sovereignty. Without a jobs-led strategy and stronger industrial muscle, India risks becoming a knowledge hub unable to mobilise its people or defend its independence. A new approach would mean investment in indigenous capabilities, innovation ecosystems, and transparent governance. For too long, budgets treated speculative entrepreneurs chasing stock gains as equal to those building factories and ecosystems. We became import-dependent. The messaging must change: tax breaks and subsidies should flow to those who invest in domestic R&D and local component ecosystems. When fiscal signals are clear – that national strength matters more than short-term profits – entrepreneurs will align with India’s long-term priorities.

Other countries show the way. Germany’s Mittelstand – small, specialised manufacturers – anchors resilience while competing globally. China’s decentralised economic management allows provinces and cities to compete and diversify, even if it has led to waste through excessive capacity creation. South Korea built domestic semiconductor, shipbuilding, and electronics industries by first investing upstream, ensuring critical parts were made at home, even at a cost.

India’s Production-Linked Incentives are promising but remain centralised. Policy design sits in Delhi, while states are reduced to passive participants. Tamil Nadu’s automobile clusters, Gujarat’s chemicals, Karnataka’s IT, and Punjab’s agribusiness – all need upgraded industrial estates, technical training institutions, and worker housing that empower women. A reimagined policy must combine national direction with local autonomy, setting broad priorities while allowing states and clusters to design sector-specific strategies. Execution must matter as much as formulation and be given the same importance. This will need realigning service seniorities away from centrally located ministries towards the districts, cities, and towns.

There is also a cultural dimension. India celebrates its service sector success, from IT exports to consulting. Manufacturing rarely enjoys the same prestige. Changing this mindset is crucial. At the same time, industrial policy must not only signal that building factories, designing components, and training workers are national priorities, but also ensure that supportive handholding is available to those venturing into production. When young graduates see manufacturing as a respected career, the ecosystem will gain momentum. When women feel safe and supported in industrial workplaces, participation will rise, strengthening families and the economy.

The current fractures in the global order are not just dangers to be managed, but opportunities to be claimed. An indigenous, jobs-led, participatory, and resilient industrial policy is not just a technocratic blueprint – it is the foundation of autonomy and equity. The lessons from Germany, China, and South Korea remind us that prosperity is never accidental; it is designed. And this design cannot be done in detached policymaking circles. It must draw on local insights and initiatives. Built on such a framework, growth can endure and translate into livelihoods, dignity, and opportunity for millions.