Economic Survey makes strong 'swadeshi' pitch to combat 'external shocks', says era of 'naive globalisation' has ended

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• Survey urges disciplined Swadeshi for resilience, not blanket protectionism
• Swadeshi should boost exports and attract global firms, not just cut imports
• States encouraged to compete and specialise for national economic strength

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The finance ministry's Economic Survey 2025-26, tabled by Nirmala Sitharaman in Parliament on Thursday, includes a detailed blueprint of the government's Aatmanirbhar Push, saying that "swadeshi" has become "inevitable and necessary" in the current global environment.

“The strategic context has shifted in ways that materially alter the calculus of openness,” the Survey noted, pointing to “export controls, technology denial regimes, carbon border mechanisms, and industrial policy in the West and East alike” as evidence of “the end of naive globalisation.”

With access to inputs, technologies and markets no longer guaranteed, the Survey said that Swadeshi must function as both shield and strategy.

“Swadeshi becomes a defensive as well as offensive policy lever: a means to ensure continuity of production in the face of external shocks, and a pathway to build enduring national capabilities that reinforce economic sovereignty," it said, at a time when India is navigating trade friction with US due to steep tariffs imposed by the Donald Trump administration.

The Economic Survey said that the question is no longer whether the state should promote Swadeshi, but “how it should do so without undermining efficiency, innovation or global integration.”

At the same time, it cautioned against indiscriminate protectionism.

“Not all import substitution is desirable, and not all forms of protection support long-term competitiveness,” it said, noting that India’s own past experience shows how “protection bred complacency, entrenched inefficiency and insulated firms from global competition.”

It said that Swadeshi “is a disciplined strategy rather than a blanket doctrine.”

Drawing lessons from East Asian industrialisation, the Survey said the key was not simply intervention but institutional discipline.

“The central lesson from East Asia is not that the state intervened, but how it intervened—and, equally importantly, how it exited.” These economies succeeded because their systems could learn from failure and reallocate resources, supported by “bureaucratic autonomy, political backing, and performance discipline.”

India’s policy ambition must go beyond import substitution towards building resilience and global indispensability, it said.

The survey said that India needs to build domestic capacity in areas that would make it strategically resilient, defining resilience as “building buffers and strengths to withstand external shocks.”

It said that India will attain strategic indispensability when the world moves from "thinking about buying Indian" to "buying Indian without thinking".

It cited Prime Minister Narendra Modi’s Independence Day remarks as setting the benchmark for this Swadeshi vision: producing goods “of the highest quality at the lowest possible price, so that people would be automatically drawn to buying Indian.”

The Survey also underlined that Swadeshi must be judged by export strength, not only by cutting imports. “Swadeshi must not be judged solely by import reduction, but by the creation of export capability.” It notes that as economies grow, “import growth is inevitable and even desirable as incomes rise and economies diversify.”

A key part of India’s strategy is attracting global firms at scale to accelerate domestic ecosystem formation, it said. “For India, attracting such firms is not about prestige. It is about accelerating ecosystem formation.” When major brands commit, “suppliers follow, skills deepen, standards rise, and exports become endogenous rather than policy-driven.”

India’s federal structure is also framed as an advantage, with states encouraged to specialise and compete. “Different states possess different endowments… and can specialise accordingly,” the Survey says, adding that a national Swadeshi strategy should “enable competition among states, reward outcomes, and disseminate best practices.”

The Survey added that resilience cannot come through insulation alone. “India’s movement from Swadeshi to strategic resilience, and from resilience to strategic indispensability, cannot be achieved through insulation alone.” It calls for “discipline, outward orientation, and credible exit,” with manufacturing and exports acting as stress tests that drive competitiveness.