Pivoting to Power: A Strategic Framework for India’s Geoeconomic Sovereignty

Murali Sundaram

Technology Consultant

 

Executive Summary

The imposition of escalating trade tariffs by the United States represents a significant external shock to the Indian economy, threatening key export sectors and challenging established growth models. However, viewing this development solely as a threat would be a strategic miscalculation. These tariffs are, more accurately, a catalyst—an urgent impetus for India to accelerate its transition from a passive participant in the global economic order to an active architect of its own geoeconomic destiny. This report presents a comprehensive strategic framework designed not merely to mitigate the immediate impact of US tariffs but to fundamentally de-risk the Indian economy from future shocks and establish a durable foundation for sovereign economic power.

The framework is built upon a rigorous analysis of both the external threat and India’s unique, often underleveraged, endogenous strengths: a vast and increasingly high-skilled human capital base, a continental-scale domestic market that serves as both an insulator and an incubator, and a historically demonstrated, albeit inconsistent, resilience to “black swan” events. By systematically harnessing these core advantages, India can transform this period of disruption into an era of profound structural transformation.

The proposed strategy rests on three integrated pillars:

1. Offensive Industrial Policy: Moving beyond defensive import substitution to proactively build globally competitive “national champions” in strategic sectors. This involves a significant evolution of the successful Production Linked Incentive (PLI) scheme—termed PLI 2.0—to incentivize deep manufacturing, component ecosystems, and domestic R&D, thereby creating high-quality employment for India’s burgeoning technical workforce.
2. Strategic Market Cultivation: Architecting a diversified and resilient trade ecosystem that reduces over-reliance on any single economic partner. This dual-pronged approach involves deepening the domestic market “fortress” through targeted fiscal stimulus while simultaneously forging “Strategic Trade and Technology Pacts” with like-minded partners that prioritize supply chain security, technology co-development, and skilled labor mobility.
3. Systemic Resilience Architecture: Institutionalizing the capacity for crisis response by establishing a permanent, agile, national security-style apparatus for managing economic shocks. The cornerstone of this pillar is the proposed establishment of a National Economic Security Council (NESC), a cabinet-level body responsible for continuous risk assessment, scenario planning, and the development of pre-approved response playbooks to ensure swift, coordinated, and effective action during future crises.

This report provides actionable policy imperatives for each pillar, offering a clear roadmap for implementation. By adopting this framework, India can not only navigate the immediate challenge of US tariffs but also emerge as a more resilient, self-reliant, and influential economic power, fully equipped to secure its interests in the volatile geopolitical landscape of the 21st century.

Section 1: The New Geoeconomic Reality: Anatomy of the Tariff Challenge

The current trade friction with the United States is not a conventional dispute over market access or trade imbalances. It represents a manifestation of a new era of geoeconomic competition, where trade policy is wielded as a primary instrument of statecraft. Understanding the anatomy of this challenge—its structure, its potential for escalation, and its underlying strategic intent—is the essential first step in formulating a robust national response.

 

1.1 The Spectrum of Economic Coercion: From Cosmetic Tariffs to Quasi-Blockades

 

The tariff threat is not monolithic; it is a structured, escalatory ladder, with each rung representing a qualitative increase in economic pressure and signaling a more confrontational strategic posture. The foundational analysis models this escalation across four distinct layers, moving from symbolic gestures to systemic disruption.¹

• Layer 1 (L1) – Cosmetic: This initial stage involves symbolic tariffs, modeled at 10%, on select, visible goods such as textiles and low-cost electronics. The primary purpose is political signaling—a warning shot intended to bring policymakers to the negotiating table without inflicting significant, broad-based economic pain.
• Layer 2 (L2) – Targeted: Escalation to this layer involves sector-specific tariffs, modeled at 20%, aimed at India’s most successful and competitive export industries. The selection of pharmaceuticals (specifically generics), IT services, and engineering goods is not arbitrary; it is designed to inflict precise and concentrated economic damage on national champions, thereby maximizing leverage.
• Layer 3 (L3) – Broad-Based: This represents a significant escalation, with tariffs of 25% applied across key manufacturing sectors, including automotive components, machinery, and gems/jewellery. The objective shifts from targeted pain to a broadside attack on the “Make in India” initiative, aiming to disrupt industrial momentum and deter investment in manufacturing capacity.
• Layer 4 (L4) – Quasi-Blockade: The final and most severe layer combines punitive tariffs (modeled at 50%) with a suite of potent non-tariff barriers (NTBs). The inclusion of measures like visa restrictions for skilled professionals, pressure against offshoring of services, and demands for data localization constitutes a fundamental challenge to India’s entire service-led, globally integrated economic model.

This escalatory structure functions as a geopolitical barometer. Movement from L1 to L2 indicates a shift from posturing to punishment. The jump to L3 signals an intent to strategically hobble India’s industrial ambitions. The triggering of L4 would represent a near-total breakdown in economic relations, moving from a trade dispute to a campaign of strategic containment. Monitoring this ladder thus provides direct intelligence on the evolving strategic intent of the United States, reframing the issue from a commercial matter for the Ministry of Commerce to a national security priority.

The following table expands upon the initial model to articulate the unstated strategic objective behind each layer of escalation, providing a clearer lens through which to interpret and anticipate policy moves.

Layer	Description	Tariff Rate	Likely Impact Area	Implied Strategic Objective
L1 – Cosmetic	Symbolic tariffs on select goods	10%	Textiles, low-cost electronics	Exert diplomatic pressure; signal discontent with current trade practices.
L2 – Targeted	Sector-specific tariffs	20%	Pharma generics, IT services, engineering goods	Inflict precise economic pain on successful sectors to force specific concessions.
L3 – Broad-Based	Across key manufacturing	25%	Auto components, machinery, gems/jewellery	Disrupt the “Make in India” industrialization drive; create broad economic uncertainty.
L4 – Quasi-Blockade	Tariffs + non-tariff barriers	50%	Visa restrictions, offshoring, data localization	Systemically decouple key sectors; challenge India’s service-led growth model and digital sovereignty.

Source: Adapted from US Tariff Escalation Report ¹

 

1.2 Sectoral Vulnerabilities and Quantitative Impact Assessment

 

India’s exposure to this escalatory threat is substantial and concentrated in its most successful export sectors. Based on 2024 data, the combined exports to the US from just five key sectors—IT & Services, Pharmaceuticals, Engineering Goods, Gems & Jewellery, and Textiles & Apparel—amount to USD 79.44 billion.¹ This figure represents the direct, first-order vulnerability to any tariff action.

• IT & Services: USD 41.6 billion
• Engineering Goods: USD 18.67 billion
• Gems & Jewellery: USD 10.0 billion
• Pharmaceuticals: USD 8.72 billion
• Textiles & Apparel: USD 7.0 billion

To quantify the potential damage, simulations have been conducted based on an average export price elasticity of approximately 0.9, a figure derived from studies by the IMF and CARE Ratings.¹ This elasticity coefficient implies that for every 10% increase in the final price of Indian goods due to tariffs, a corresponding 9% reduction in export volume can be expected. Applying this to the baseline exposure yields a sobering projection of potential revenue losses:

• L1 (10% Tariff): An estimated revenue loss of USD 7.15 billion.
• L2 (20% Tariff): An estimated revenue loss of USD 14.29 billion.
• L3 (25% Tariff): An estimated revenue loss of USD 16.87 billion.
• L4 (50% Tariff): A catastrophic estimated revenue loss of USD 33.15 billion.

These are not merely theoretical figures. The severity of the L4 scenario is corroborated by external analysis. The Asian Development Bank (ADB), for instance, has already revised India’s GDP growth forecast for FY2026 downward from 7.0% to 6.5%, explicitly citing the anticipated impact of 50% US tariffs on Indian exports as the primary driver for the downgrade.² This external validation underscores the credibility of the threat and the urgent need for a comprehensive mitigation and de-risking strategy. Even a partial re-routing of exports to other markets would leave a significant residual loss, estimated at over USD 8.4 billion even after three years under an L3 scenario.¹

 

1.3 Beyond Tariffs: The Evolving Playbook of Economic Statecraft

 

A singular focus on tariffs, while necessary, is strategically insufficient. The L4 “Quasi-Blockade” scenario reveals a more sophisticated and dangerous playbook of economic statecraft that targets the foundational pillars of India’s economic model.¹ The inclusion of non-tariff barriers such as visa restrictions for tech professionals, pressure to curb offshoring, and stringent data localization requirements represents an attack on the principle of “weaponized interdependence.”

This concept describes the leveraging of deep economic integration—in this case, the symbiotic relationship between the Indian IT services industry and the US corporate sector—as a tool of coercion. The threat is not simply that Indian software services become more expensive; it is that the very mechanisms enabling their delivery—the free movement of skilled human capital and the cross-border flow of data—could be severed. This tactic directly targets the business model that has propelled India’s most valuable export sector, which accounts for over half of the total exposure at USD 41.6 billion.¹

This evolving playbook aligns with the broader global environment of heightened geopolitical tensions and financial market volatility, which the Reserve Bank of India (RBI) has consistently flagged as a primary downside risk to India’s growth outlook.⁴ The challenge, therefore, is not a simple trade dispute that can be resolved through negotiation. It is a structural challenge to India’s economic sovereignty that requires a response of equal strategic depth, moving beyond tactical trade diversification to a fundamental rethinking of how India manages its global dependencies and leverages its intrinsic national strengths.

Section 2: India’s Endogenous Strengths: The Three Pillars of Economic Statecraft

 

While the external environment presents formidable challenges, India’s strategic response should not be rooted in a defensive crouch. It must be built upon a confident and clear-eyed assessment of the nation’s profound endogenous strengths. These three pillars—a demographic dividend maturing into a high-skill workforce, a vast domestic market that provides unparalleled scale and insulation, and a proven, if imperfect, capacity for resilience—form the bedrock of a proactive strategy for achieving geoeconomic sovereignty.

 

2.1 The Human Capital Dividend: From Demographic Mass to an AI-Fluent Workforce

 

India’s primary strategic asset is its human capital. The sheer scale is staggering: total employment stood at 64.33 crore in 2023-24, reflecting a net addition of 16.83 crore jobs over the preceding six years.⁵ This expansion has been accompanied by positive macroeconomic trends, including a significant decline in the unemployment rate from 6.0% in 2017-18 to 3.2% in 2023-24.⁶ Critically, this growth is increasingly occurring within the formal sector, as evidenced by the net additions to the Employees’ Provident Fund Organisation (EPFO), which more than doubled from 61 lakh in FY19 to 131 lakh in FY24, indicating improved social security and economic stability.⁶

Beyond these headline numbers lies a more nuanced and strategically vital reality. India is rapidly emerging as a global hub for high-end digital skills. The 2024 India Skills Report highlights the nation’s premier global position in Artificial Intelligence (AI) skill penetration and talent concentration.⁷ This is not a future aspiration but a current reality. India boasts an installed talent base of 416,000 AI professionals as of August 2023, with a 14-fold increase in the number of AI-skilled individuals between 2016 and 2023.⁸ The demand for this talent is projected to reach approximately 1 million by 2026, fueled by an Indian AI industry expected to grow at a CAGR of 45% to reach USD 28.8 billion by 2025.⁷

However, this elite capability coexists with a significant structural challenge: the “employability paradox.” Despite producing a vast number of graduates, a large portion lacks the practical, industry-relevant skills required for immediate employment. Recent reports paint a stark picture, with one indicating that as many as 83% of engineering graduates remain without a job or internship offer.¹¹ Another analysis suggests that only a small fraction, around 18.43%, are directly employable in the software sector, with a mere 3.84% suited for roles in technology startups.¹² This points to a severe mismatch between the theoretical knowledge imparted by the mass higher education system and the applied skills demanded by the modern economy.¹³

These two seemingly contradictory data sets—world-leading AI talent and mass graduate unemployability—describe a “barbell” shaped workforce. At one end is a small, globally competitive, highly compensated cadre of AI and digital specialists, primarily concentrated in the IT and GCC sectors. At the other end is a vast reservoir of graduates holding formal degrees but lacking the practical skills for high-productivity roles. The “middle” of this structure—comprising skilled technicians, advanced manufacturing specialists, and applied digital professionals—remains underdeveloped. This barbell structure creates a strategic vulnerability. An L4-style geoeconomic attack on the IT services sector targets the elite end of the barbell, with few alternative high-value employment avenues for that talent pool. Meanwhile, the other end acts as a drag on national productivity and a source of social friction.

The strategic imperative, therefore, is to use targeted policy interventions to “fill the middle” of the barbell. This involves transforming the latent potential of the underemployed engineering graduates into a resilient, diversified, and productive workforce for emerging sectors like advanced manufacturing, domestic technology, and green energy. Initiatives like the Pradhan Mantri Kaushal Vikas Yojana (PMKVY), which has already trained over 1.57 crore people, provide a template for this transformation.⁶ By bridging this skill gap, India can convert a pressing social problem into the very core of its economic de-risking and industrial upgrading strategy.

 

Metric	Value / Status	Source(s)
Total Workforce	64.33 crore (2023-24)	5
Unemployment Rate	3.2% (2023-24, down from 6.0% in 2017-18)	6
Formal Employment Growth	Net EPFO additions doubled from 61 lakh (FY19) to 131 lakh (FY24)	6
AI Talent Pool	416K installed base; projected demand of 1M by 2026	10
AI Skill Penetration	Ranked 1st globally	7
Engineering Graduate Employability	As low as 17% employable; 83% may lack job/internship offers	11
Key Skilling Initiatives	PMKVY (1.57 cr trained), Craftsmen Training Scheme (1.24 cr enrolled)	6

 

2.2 The Domestic Consumption Fortress: Insulating Growth and Fostering Innovation

 

India’s second pillar of strength is its vast, dynamic, and increasingly prosperous domestic market. This continental-scale economy serves as the primary engine of national growth, providing a powerful buffer against global volatility. The economy’s recent performance, with a real GDP expansion of 7.8% in the first quarter of FY2025-26, has comfortably surpassed market expectations and solidified India’s position as the world’s fastest-growing major economy.¹⁵ This robust growth is overwhelmingly powered by domestic drivers: private final consumption expenditure expanded by 7.0%, while government final consumption expenditure grew by a strong 9.7%.¹⁶ With projections indicating India will become the world’s third-largest economy with a GDP of USD 7.3 trillion by 2030, the scale and momentum of this domestic engine are set to increase.¹⁵

More than just an economic shock absorber, this domestic market is a strategic asset that can be actively cultivated to build industrial capacity and foster innovation. The Production Linked Incentive (PLI) scheme stands as a landmark case study in this approach. Launched in 2020, the PLI scheme has successfully leveraged the pull of domestic demand to catalyze a manufacturing renaissance. The scheme has attracted committed investments of ₹1.61 lakh crore, with actual realized investments reaching approximately ₹1.76 lakh crore by March 2025.¹⁸ This capital infusion has generated total sales exceeding ₹16.5 lakh crore and created over 12 lakh direct and indirect employment opportunities.¹⁸

The sectoral impacts have been transformative:

• Electronics: In a clear demonstration of the scheme’s power, electronics production has surged by 146% in four years, from ₹2.13 lakh crore in FY 2020-21 to ₹5.25 lakh crore in FY 2024-25. This has turned India from a net importer into a major mobile phone manufacturing and export hub.¹⁸
• Pharmaceuticals: The PLI scheme has reversed a dangerous dependency on imported raw materials. India has transitioned from a net importer of bulk drugs, with a trade deficit of ₹1,930 crore in FY 2021-22, to a net exporter with a surplus of ₹2,280 crore in FY 2024-25.¹⁸

The success of the PLI scheme illustrates a powerful principle: the domestic market can function as both an innovation laboratory and a geoeconomic shield. By providing a large and predictable demand base, it allows domestic firms to achieve economies of scale, a critical prerequisite for becoming globally competitive. This de-risked “sandbox” enables companies to test new products, refine complex manufacturing processes, and build resilient supply chains before venturing into the fiercely competitive global arena. The trajectory of Reliance Jio, which leveraged aggressive pricing and massive infrastructure investment to capture over 400 million domestic subscribers and catalyze a nationwide digital revolution, exemplifies this model.²⁰ Jio did not begin by competing in mature overseas markets; it first achieved unprecedented scale in India, which then provided the foundation for its global ambitions. This reframes the domestic market from a passive “cushion” against external shocks to a proactive “springboard” for forging national champions capable of withstanding and shaping the global economic landscape.

 

2.3 The ‘Antifragile’ Economy: A Historical Analysis of India’s Response to Black Swan Events

 

India’s economic history is punctuated by its encounters with severe, unforeseen shocks, or “black swan” events. The nation’s ability to withstand, adapt, and recover from these crises constitutes a third, vital strategic asset. This resilience, however, is not an inherent, immutable trait; it is a direct function of the institutional frameworks in place and, critically, the policy choices made under extreme pressure. A comparative analysis of India’s response to two major global crises—the 2008 Global Financial Crisis (GFC) and the 2020 COVID-19 pandemic—provides dispositive evidence for this conclusion.

Case Study 1: The 2008 Global Financial Crisis (GFC)

India’s response to the GFC is widely regarded as a qualified success. The country was largely insulated from the first-round effects of the crisis due to the prudent regulations of its financial sector, which had minimal exposure to the toxic subprime mortgage-backed securities that triggered the global meltdown.21 However, as the financial crisis metastasized into a global economic downturn, India was impacted by the second-round effects through channels of trade finance, capital flows, and export demand.21

The response from the Government of India and the RBI was swift, coordinated, and aggressive. They deployed a range of countercyclical measures focused on shoring up domestic demand. Monetary policy was sharply relaxed, with the Cash Reserve Ratio (CRR) being cut in stages from a peak of 9% to 5%, injecting massive liquidity into the system.²³ This was complemented by three focused fiscal stimulus packages that included tax relief and increased public expenditure.²⁴ This proactive, demand-centric policy mix was effective, cushioning the economy from the worst of the global recession and enabling a relatively rapid return to a high-growth trajectory.²⁴

Case Study 2: The COVID-19 Pandemic

In contrast, India’s economic response to the COVID-19 pandemic offers a more cautionary lesson. The economy entered the crisis in 2020 on a weaker footing, already experiencing a significant growth slowdown.25 The government’s response to the severe economic disruption caused by one of the world’s most stringent lockdowns was fundamentally different from its 2008 playbook. The economic package was criticized by analysts as being “seriously deficient on demand side interventions”.25

Instead of a large, direct fiscal stimulus, the response was heavily weighted towards supply-side measures, such as credit guarantees and liquidity support through the banking system.²⁵ The component of direct, “above-the-line” fiscal spending amounted to only about 1.5% of GDP—a figure considered small relative to the severity of the lockdown and in comparison to the stimulus packages deployed by other major economies.²⁵ This fiscally conservative, supply-focused approach was insufficient to counteract the collapse in aggregate demand, leading to projections of a severe GDP contraction and a “dismal” outlook for a swift economic revival.²⁵

This comparative analysis reveals a critical truth: resilience is a policy choice. The underlying structure of the Indian economy—its large domestic sector and favorable demographics—provided a baseline of resilience in both 2008 and 2020. Yet, the outcomes were starkly different. In 2008, a proactive policy doctrine that prioritized supporting aggregate demand in a consumption-led economy led to a successful outcome. In 2020, a different doctrine prioritizing fiscal conservatism led to a much more painful economic adjustment. The lesson is clear: India possesses the capacity for effective crisis management, but this capacity must be institutionalized through a robust framework and a pre-committed policy doctrine to ensure it is reliably and effectively deployed in future crises. This historical evidence forms the cornerstone of the recommendation for a permanent National Economic Security Council armed with a clear, demand-supportive crisis response playbook.

Parameter	2008 Global Financial Crisis	COVID-19 Pandemic (2020)
Nature of Shock	External financial and demand shock	Concurrent domestic supply and demand shock
Pre-Crisis Economic State	Strong growth (avg. 8.8% in 5 prior years)	Pre-existing slowdown (GVA growth falling since 2016)
Primary Transmission Channel	Capital outflows, trade finance crunch, export collapse	National lockdown, supply chain disruption, job losses
Key Monetary Response	Aggressive easing: CRR cut from 9% to 5%; policy rate cuts	Liquidity injections, targeted credit, loan moratoriums
Key Fiscal Response	Proactive, demand-side: Three stimulus packages (tax relief, public spending)	Supply-side focused: Credit guarantees; small direct stimulus (1.5% of GDP)
Economic Outcome	Growth moderated but recovered swiftly	Severe GDP contraction; “dismal” revival prospects initially

Source: Analysis based on ²¹

Section 3: A Strategic Framework for Geoeconomic Sovereignty

 

The analysis of the external threat environment and India’s intrinsic strengths necessitates a paradigm shift in national economic strategy. A purely defensive, reactive posture is no longer sufficient. India must adopt a proactive and integrated framework designed to build durable economic power and secure its sovereignty in an increasingly contested world. This framework is constructed upon three mutually reinforcing pillars: Offensive Industrial Policy, Strategic Market Cultivation, and Systemic Resilience Architecture.

 

3.1 Pillar I: Offensive Industrial Policy – Building National Champions

 

The first pillar requires moving beyond the traditional, defensive mindset of import substitution towards a proactive, “offensive” industrial policy. The objective is not merely to replace foreign goods but to build globally competitive “national champions” in strategic, high-value-added sectors. This approach reframes industrial policy as a core instrument of national power, essential for enhancing economic complexity, creating high-quality jobs, and reducing critical dependencies.

The demonstrated success of the Production Linked Incentive (PLI) scheme provides the foundational model for this pillar.¹⁸ However, the strategy must evolve. The next phase, PLI 2.0, should be strategically calibrated to drive the economy up the value chain. This means shifting the focus of incentives from final assembly towards deep manufacturing, the creation of robust domestic component ecosystems, and, most critically, investments in research and development (R&D). By rewarding domestic value addition and innovation, India can transition from being a location for global manufacturing to becoming a hub for global innovation.

This offensive industrial policy directly addresses the “Barbell Workforce” vulnerability identified earlier. By creating sustained demand for advanced manufacturing, applied engineering, and technical supervision roles, it provides a clear pathway for the millions of underemployed engineering graduates. A thriving domestic high-tech manufacturing sector becomes the “middle” of the barbell, absorbing this latent talent pool and transforming a structural weakness into a powerful engine of productivity and growth. This creates a virtuous cycle: industrial policy builds national champions, which in turn create demand for a skilled workforce, justifying and enabling the necessary reforms in technical education.

 

3.2 Pillar II: Strategic Market Cultivation – Architecting a Diversified Trade Ecosystem

 

The second pillar is designed to mitigate the risks of over-dependence on any single market or economic partner, a vulnerability starkly highlighted by the current tariff threat from the United States. This requires a sophisticated, two-pronged approach to market cultivation that simultaneously strengthens India’s internal resilience and expands its external options.

The first prong is the deepening of the domestic fortress. This involves the continued and deliberate use of fiscal and monetary policy to stimulate domestic demand, ensuring that the “domestic springboard” remains robust and can absorb a greater share of domestic production if external markets become hostile.⁴ A strong, consumption-driven domestic economy is the ultimate guarantor of economic stability and provides the scale necessary for Indian firms to innovate and compete globally.

The second prong involves forging strategic alliances that transcend the limitations of traditional Free Trade Agreements (FTAs). India should prioritize the negotiation of “Strategic Trade and Technology Pacts” with like-minded partners such as the European Union, the United Kingdom, Australia, and key ASEAN nations. These agreements must go beyond simple tariff reduction to include deeper integration in areas of strategic importance. Key clauses should cover supply chain security and resilience, technology co-development and transfer, mutual recognition of standards, and, crucially, streamlined mobility for skilled professionals and tech workers. This last element provides a direct countermeasure to the L4 threat of visa restrictions, ensuring that India’s human capital can be deployed globally as a strategic asset.¹ This approach transforms trade policy from a purely commercial exercise into a tool for building resilient, trusted networks that enhance national security.

 

3.3 Pillar III: Systemic Resilience Architecture – Institutionalizing Crisis Response

 

The third pillar addresses the most critical lesson from India’s history of crisis management: resilience is not automatic; it must be designed, built, and institutionalized. The starkly different outcomes of the 2008 and 2020 crisis responses demonstrate that having the latent capacity for resilience is insufficient. What is required is a permanent, agile, and empowered institutional architecture capable of anticipating, managing, and rapidly recovering from severe economic shocks.

This pillar advocates for formalizing the often ad-hoc crisis management mechanisms of the past into a standing, national security-style apparatus. This body would be tasked with continuous geoeconomic risk assessment, sophisticated scenario planning (using models like the L1-L4 tariff framework as a template), and the development of pre-approved, well-rehearsed response playbooks for a range of contingencies. This ensures that in the heat of a crisis, decision-making is swift, coordinated, and guided by a clear, pre-agreed doctrine rather than being improvised under pressure.

This architecture would not be built from scratch. It would integrate and empower existing institutional building blocks, such as the National Disaster Management Authority (NDMA), the Monetary Policy Committee (MPC), and the frameworks established under the Fiscal Responsibility and Budget Management Act (FRBMA).²⁷ However, it would place them within a more powerful, centralized command-and-control structure designed specifically for navigating economic emergencies, ensuring that monetary, fiscal, and industrial policy levers are deployed in a coherent and mutually reinforcing manner. This institutionalizes the lessons of the past, ensuring that the effective, demand-centric response of 2008 becomes the default template for future crises.

Section 4: Actionable Policy Imperatives and Implementation Roadmap

 

Translating this strategic framework into reality requires a set of concrete, actionable, and time-bound policy initiatives. The following imperatives provide a clear implementation roadmap for each of the three strategic pillars.

 

4.1 For Pillar I (Offensive Industrial Policy)

 

• Launch PLI 2.0: The government must expeditiously design and launch the next iteration of the Production Linked Incentive scheme. PLI 2.0 should evolve from the current model by incorporating tiered incentives that explicitly reward higher domestic value addition, investments in component manufacturing, and expenditure on in-country R&D. The scheme should also be expanded to target new strategic sectors identified as critical for future growth and security, such as semiconductor design and fabrication, advanced chemistry cell (ACC) batteries, green hydrogen ecosystems, and climate technologies.¹
• Establish Sovereign IP Havens: To attract and anchor high-value innovation, India should create designated “Sovereign Intellectual Property (IP) Havens.” These would be special economic zones offering world-class physical and digital infrastructure, coupled with a robust legal and regulatory regime that guarantees globally benchmarked IP protection. The goal is to incentivize global technology firms not just to manufacture in India, but to domicile their core IP and conduct their most advanced R&D within India’s borders, thereby insulating these critical assets from extraterritorial geoeconomic pressures.
• Mandate a National Mission for Skill Alignment: To bridge the “employability paradox,” a national mission must be launched to radically overhaul the engineering and technical education curriculum. This must be a collaborative effort, mandated by the government but led by industry bodies like NASSCOM and CII, to ensure the curriculum is aligned with real-world industry needs.³⁰ University and technical college funding should be progressively linked to measurable outcomes, such as graduate employability rates and median starting salaries. Concurrently, government-backed skilling programs like PMKVY must be massively scaled and reoriented towards high-demand future skills in AI, IoT, advanced manufacturing, and mechatronics, providing a clear pathway to convert India’s latent demographic mass into a productive, future-ready workforce.⁶

 

4.2 For Pillar II (Strategic Market Cultivation)

 

• Deploy Fiscal Levers for Domestic Demand: To reinforce the “domestic fortress,” the government should utilize fiscal policy to strategically boost domestic consumption. This includes a time-bound plan for the rationalization of the Goods and Services Tax (GST) structure to lower the burden on mass-market goods and services, as well as targeted income tax cuts for lower and middle-income brackets.⁴ Special emphasis should be placed on stimulating rural and semi-urban demand, which has shown recent signs of strength and has a high multiplier effect on the broader economy.⁴
• Forge Strategic Technology Pacts (STPs): Diplomatic and commercial efforts must be prioritized to conclude comprehensive STPs with key strategic partners, starting with the European Union, the United Kingdom, and Australia. These negotiations must aim higher than conventional FTAs. The final agreements should include binding chapters on data adequacy and free cross-border data flows, mutual recognition of technical standards and professional qualifications, and the creation of streamlined mobility corridors for technology professionals, researchers, and students.
• Activate the Diaspora as a Geoeconomic Asset: India must move beyond cultural engagement to create a formal, institutional mechanism to channel the immense capital, technical expertise, and political influence of the global Indian diaspora. This could take the form of a dedicated sovereign wealth fund co-invested by the government and diaspora members, focused on strategic technology sectors in India. Furthermore, a high-level advisory council of prominent diaspora leaders should be established to provide direct input on economic and technology policy and to act as advocates for India’s interests in their host countries.

 

4.3 For Pillar III (Systemic Resilience Architecture)

 

• Establish a National Economic Security Council (NESC): An executive order should be issued to establish the NESC as a permanent, cabinet-level body. Chaired by the Prime Minister, its members should include the Ministers of Finance, Commerce, External Affairs, and Defence, the National Security Advisor, the Governor of the RBI, and the head of NITI Aayog. The NESC would be supported by a professional secretariat staffed by economists, industry experts, and intelligence analysts, tasked with providing continuous monitoring of geoeconomic threats and coordinating a whole-of-government response during crises.
• Create a Dynamic Economic Stabilization Fund: Legislation should be passed to create a dedicated, counter-cyclical “Economic Stabilization Fund.” This fund would be capitalized through a small cess on corporate profits or windfall taxes during periods of high growth. Its explicit mandate would be to finance rapid and targeted fiscal stimulus—such as direct cash transfers or temporary GST cuts—during declared economic emergencies, as determined by the NESC. This institutionalizes the successful demand-support lesson from the 2008 GFC response and prevents a recurrence of the fiscally constrained approach seen in 2020.²⁸
• Mandate Systemic Geoeconomic Stress Tests: The NESC, through relevant sectoral regulators (e.g., RBI, SEBI, TRAI), should be empowered to mandate regular “geoeconomic stress tests” for companies and institutions in critical sectors like finance, telecommunications, pharmaceuticals, and energy. These tests would simulate severe disruption scenarios, such as the L4 quasi-blockade, to identify and compel the mitigation of vulnerabilities in critical supply chains, market dependencies, and access to key technologies.¹ The results would inform national resilience planning and sectoral policy.

Conclusion: The Path to a Resilient, Self-Reliant, and Influential Economic Power

 

The challenge posed by US tariffs is a defining moment for the Indian economy. A response limited to tactical negotiations and piecemeal trade diversification would be profoundly inadequate, a failure to recognize the structural shift in the global landscape. The era of passive globalization has ended; we have entered an age where economic interdependence is as much a vulnerability as it is an opportunity. To navigate this new reality, India must adopt a new paradigm: economic policy must be treated as an integral and co-equal component of national security strategy.

The strategic framework outlined in this report offers a comprehensive pathway for this transformation. It is a strategy of ambition, not of apprehension. It seeks not just to weather the immediate storm but to harness its energy to propel India forward on its journey to becoming a developed nation—Viksit Bharat.

By implementing an Offensive Industrial Policy, India can finally resolve the paradox of its “barbell” workforce, creating millions of high-quality jobs and building a complex, technologically advanced industrial base. By pursuing Strategic Market Cultivation, India can insulate its growth from the whims of any single trading partner and build a network of resilient alliances with like-minded nations. And by establishing a Systemic Resilience Architecture, India can institutionalize the lessons of past crises, ensuring that its response to future shocks is swift, decisive, and effective.

The path forward requires bold vision and disciplined execution. It demands a whole-of-government approach that breaks down silos between ministries and aligns fiscal, monetary, industrial, and foreign policy towards a singular national objective. By systematically leveraging its unique and formidable strengths in human capital, domestic scale, and proven resilience, India can not only overcome the present challenge but emerge from it stronger, more self-reliant, and as a truly sovereign economic power, capable of shaping its own destiny in the 21st century.

Works cited

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