02 February 2026: MAINS CURRENT AFFAIRS

MAINS Current Affairs includes Swadeshi as a Disciplined Strategy & Economic Survey: India Must Shift to an Entrepreneurial State – Rewritten Points

Health

ECONOMY

1. Swadeshi as a Disciplined Strategy

Context

The Economic Survey 2025–26 argues that a disciplined form of Swadeshi is both “unavoidable and essential” in a world marked by export controls, technology denial regimes, and carbon-based trade barriers.

Understanding the Survey’s Perspective

The Survey notes that, unlike firms in post-war United States, Germany, Japan, and East Asian economies, Indian companies have been relatively hesitant to take long-term risks or invest in national capacity-building.
It highlights that many Indian firms still depend on regulatory gaps or protected markets rather than competitiveness, efficiency, or innovation-led scaling.
Swadeshi, according to the Survey, involves safeguarding uninterrupted production during external shocks and building durable domestic capabilities that strengthen economic sovereignty.
Capital expenditure has risen from 6% to 4% of GDP between FY20–FY25, yet private sector investment remains weak.

Status of India’s Manufacturing Sector

Manufacturing currently contributes 17% to India’s GDP, and the national goal is to raise this to 25%.
Focus sectors include 14 sunrise industries such as semiconductors, medical devices, renewable energy components, batteries, leather, and textiles.
Industrial sector output is forecast to grow at 2%, up from 5.9% in FY25.
Industrial GVA recorded 0% growth in H1 FY26, surpassing both H1 FY25 (6.1%) and the pre-COVID average (5.2%).
India’s innovation ecosystem has improved significantly, with the country rising to 38th place in the Global Innovation Index (2025) from 66th (2019).

High-Growth Manufacturing Segments

Computer, electronic, and optical goods: 9% growth
Motor vehicles, trailers, semi-trailers: 5%
Other transport equipment: 1%

Employment Trends

Seven states account for nearly 60% of manufacturing jobs.
Tamil Nadu leads with 15%, followed by Gujarat and Maharashtra (both at 13%).

Major Challenges for Indian Manufacturing

Infrastructure gaps: High logistics costs, poor port efficiency, and power shortages reduce competitiveness.
Low R&D spending: Less than 1% of GDP invested in R&D limits high-tech production.
Heavy import reliance: Especially for electronic components, semiconductors, and defence hardware.
Skill shortages: Worker skill sets often do not match industry needs.
Low productivity: Fragmented small units, limited automation, and outdated machinery hinder output.
Strong global competition: Vietnam, Bangladesh, and China offer cheaper manufacturing ecosystems.
Environmental compliance pressures: Higher costs for meeting sustainability standards.

Key ‘Make in India’ Enablers

National Manufacturing Mission (NMM): Announced in Union Budget 2025–26 to create a unified long-term roadmap combining policy, implementation, and governance.
Ease of Doing Business: India rose to 63rd in the World Bank DBR 2020 from 142nd in 2014.

Recent Success Stories in Indian Manufacturing

Pharmaceuticals & Vaccines

India not only achieved rapid COVID-19 vaccination at home but became a major supplier to developing countries.
Produces 60% of the world’s vaccines.
Pharma industry ranks 3rd globally by volume and 14th by value, and is projected to grow to USD 130B by 2030 and USD 450B by 2047.

Transport & Mobility

Vande Bharat Trains: India’s first indigenous semi-high-speed trains, with 102 services (51 trains) now operating.
INS Vikrant: India’s first home-built aircraft carrier, contributing to defence self-reliance.

Electronics

Electronics manufacturing has multiplied sixfold, and exports have grown eight times in the last decade.
Domestic value addition increased from 30% to 70%, with targets to reach 90% by FY27.
India has become the 2nd-largest mobile producer, with 99% of phones made domestically.

Emerging Export Successes

Indian bicycles see strong demand in the UK, Germany, and the Netherlands.
‘Made in Bihar’ boots are now used by the Russian Army, reflecting India’s growing defence manufacturing footprint.
Amul has expanded into the US market, showcasing Indian dairy products globally.

Conclusion

As India moves towards its $35 trillion vision for 2047, manufacturing will be the core engine of long-term growth.
With supportive reforms, targeted incentives, and robust supply chains, the sector has gained strong traction.
If this momentum sustains, India can evolve from being the “factory of the world” into the “innovation and leadership hub of the world.”

ECONOMY

1. Economic Survey: India Must Shift to an Entrepreneurial State – Rewritten Points

Context

The Economic Survey 2025–26 argues that India needs to evolve into an Entrepreneurial State, borrowing the concept from Mariana Mazzucato.

What is an Entrepreneurial State?

It refers to a governance model where the state takes calculated risks and innovates even under uncertainty, instead of waiting for complete clarity.
Such a state structures and manages risk, learns through trials, and adjusts course without getting paralysed by fear of failure.
It does not imply state capitalism, government-run businesses, or privileging private interests.
Instead, it emphasises mission-driven policy, long-term investment, and proactive vision.

Core Features of an Entrepreneurial State

Bounded Experimentation: Institutions should have authorised “safe zones” allowing innovation with accountability and periodic evaluation.
Regulatory Sandboxes: The model should expand beyond fintech into areas such as labour markets and environmental regulation to encourage safe innovation.
Legal Protection for Good-Faith Decisions: Officials should not fear punitive action when acting responsibly and innovatively.
Independent Ex-Post Evaluation: Decisions should be judged based on information available at the time—not solely on outcomes.
India already exhibits early signs of this—through mission-mode initiatives in semiconductors, green hydrogen, and changes in public procurement to support first-of-its-kind domestic technology.

Challenges in Current Governance Approach

Risk Aversion: Bureaucratic systems often reward compliance over judgement, discouraging experimentation.
Permanence Bias: Temporary policies tend to become permanent, reducing the ability to test and adapt.
Backward-Looking Accountability: Audits and judicial reviews frequently evaluate decisions only retrospectively, creating hesitation among policymakers.

Why India Needs an Entrepreneurial State

Global Political and Economic Uncertainty

Major global disruptions may impact India with a lag, creating vulnerabilities in growth, capital flows, and financial stability.

Rising Trade Hostility

Strategic competition has triggered more coercive trade practices, increased sanctions, and politically driven supply chain shifts.
Policymaking worldwide is becoming more inward-looking, forcing nations to balance autonomy, growth, and stability.

Risk of Systemic Global Shock

India faces the possibility of a cascade crisis where geopolitical, financial, and technological stresses feed into one another.
Though a lower-probability event, the potential damage could exceed the 2008 global financial crisis.
A sharp shock could disrupt capital flows, weaken the rupee, and strain macroeconomic stability.

Conclusion

State capacity goes beyond administrative machinery; it is shaped by incentives, risk appetite, and governance culture.
The Survey emphasises building institutions that are adaptive, innovative, and capable of responding to fast-changing global realities.
India’s long-term economic vision must combine stability and democratic accountability with entrepreneurial governance and institutional redesign to thrive in a volatile world.