A Call for Economic Self-Reliance: Why India May Need a New Independence Movement

• Trade deficit averaged 6.4% of GDP over the past decade.

• Manufacturing contributes just 13% to GDP.

• India imports 85% of crude oil and 50% of natural gas.

• Defence imports averaged 38% of procurement needs.

• R&D spending remains low at 0.6% of GDP.

India may need what analysts describe as a “new independence movement”—not political, but economic—aimed at reducing the country’s reliance on foreign capital, imported energy, overseas defence supplies and advanced technologies. That is the central argument of a recent strategy report released by Kotak Institutional Equities, which examines India’s vulnerabilities in an era marked by geopolitical friction and rising protectionism.

According to the report, intensifying global conflicts, tightening technology-transfer restrictions and resource nationalism are limiting India’s ability to depend on imports and external financing. In this environment, strengthening domestic manufacturing and expanding self-reliance are no longer optional policy goals but strategic imperatives.

The study notes that India has historically managed its external dependencies by importing goods and capital. However, as global supply chains become increasingly politicised and access to foreign resources grows more constrained, that approach may not remain sustainable. Analysts argue that deeper structural reforms are needed to reduce exposure to global shocks.

External Imbalances and Emerging Risks

Between FY2016 and FY2026, India’s trade deficit averaged 6.4% of GDP, while the current account deficit stood at an average of 1% during the same period. Although manageable so far, the report cautions that structural weaknesses could intensify.

One particular concern is India’s heavy dependence on software exports and remittances from overseas workers. As artificial intelligence reshapes global service industries, traditional outsourcing models could face disruption, potentially weakening two major pillars of India’s foreign exchange earnings.

Manufacturing: The Missing Engine

A central recommendation of the report is a more aggressive push toward domestic manufacturing. Currently, manufacturing accounts for only about 13% of India’s GDP—one of the lowest shares among major global economies.

Expanding industrial capacity and increasing domestic value addition would reduce dependence on imported goods, strengthen supply chains and improve macroeconomic resilience. The analysts suggest that long-term economic stability requires a shift from consumption-driven growth toward production-led expansion.

Energy Security as a Strategic Priority

Energy dependence remains one of India’s most pressing vulnerabilities. The country imports roughly 85% of its crude oil requirements and about half of its natural gas consumption. In recent years, imported energy has contributed to more than half of the overall trade deficit.

To address this imbalance, the report identifies renewable energy as the most sustainable long-term solution. Projections indicate that clean energy sources could make up 40% of India’s energy mix by FY2056. Over the same timeframe, the share of domestically sourced energy could increase from 63% to 72%, significantly improving energy security and reducing external exposure.

Defence Indigenisation Gains Urgency

Defence imports represent another area of concern. Between FY2016 and FY2024, India sourced an average of 38% of its defence procurement needs from abroad.

The report calls for accelerated approval of indigenous systems, stronger policy incentives for private-sector manufacturers and more robust technology transfers from global suppliers. Reducing reliance on imported defence platforms is viewed not only as an economic goal but also as a strategic necessity in a more volatile geopolitical climate.

The Technology Gap

India’s limited investment in research and development presents a long-term challenge. Current R&D expenditure stands at approximately 0.6% of GDP—substantially lower than spending levels in countries such as South Korea, the United States and China.

To narrow this gap, Kotak recommends expanding government-to-government technology partnerships with advanced economies including Japan, South Korea, France and Germany. It also encourages deeper collaboration between Indian firms and global technology leaders in sectors such as semiconductors, electronics and advanced manufacturing.

Such partnerships could accelerate domestic capability-building while integrating India into high-value global supply chains.

Short-Term Pain, Long-Term Gain

The report acknowledges that reforms aimed at boosting competitiveness—such as lowering trade barriers and encouraging greater domestic competition—may initially compress corporate profit margins and dampen stock market returns.

However, analysts argue that temporary financial headwinds should not deter policymakers. Structural transformation, they contend, is essential for building globally competitive Indian enterprises capable of thriving in a more fragmented world economy.

In their assessment, modest near-term equity returns may be a reasonable trade-off for durable long-term economic strength.

Toward Economic Sovereignty

The broader message of the report is clear: India’s next phase of development may depend less on integration through imports and more on domestic capability-building.

As geopolitical tensions reshape trade flows and technology access, economic resilience increasingly hinges on production capacity, energy independence, defence self-sufficiency and innovation investment. What is being proposed is not isolationism, but strategic autonomy—a recalibration of growth priorities in response to a changing global order.

If implemented effectively, such a shift could redefine India’s economic trajectory, transforming vulnerability into resilience and aspiration into structural strength.