Economic resilience cannot mean global insulation; domestic production "may cost more": Principal Secy to PM

The article highlights the tension between globalization (sourcing from the cheapest provider) and economic resilience (building domestic capacity to withstand shocks). Building domestic capabilities, such as through the Production Linked Incentive Scheme, often entails higher costs compared to importing from cheaper global hubs like China. The Principal Secretary argues that this 'resilience premium' is a necessary cost to avoid the severe consequences of supply chain disruptions, as seen during the COVID-19 pandemic and geopolitical conflicts. However, he cautions against a return to pre-1991 Import Substitution Industrialization, emphasizing that domestic manufacturing must ultimately become competitive and export-oriented. The UPSC often asks candidates to evaluate the success of 'Aatmanirbhar Bharat' not just in terms of self-reliance, but also regarding global competitiveness and integration into Global Value Chains.

The Principal Secretary's remarks reflect a shift in macroeconomic risk assessment from a traditional approach (focusing on a normal distribution of gains and losses) to a strategy prioritizing the avoidance of 'disaster' scenarios (tail risk events). This shift is driving global governments to actively intervene in markets by building fiscal buffers, diversifying suppliers, and creating strategic reserves (e.g., Strategic Petroleum Reserves). This represents an evolution in industrial policy where the state actively guides investment toward critical sectors to ensure national security and economic stability. For UPSC Mains, this illustrates the changing role of the state in a volatile global economy, moving beyond mere regulation to proactive capacity building in strategic sectors.

The push for economic resilience is deeply intertwined with changing geopolitical realities, specifically the weaponization of supply chains and trade. The realization that excessive dependence on a single country or region creates critical vulnerabilities has led to strategies like 'China Plus One' and 'friend-shoring'. India's approach, as articulated here, aims to navigate this landscape by fostering strategic autonomy without decoupling from the global economy. The ability to remain 'open without becoming excessively vulnerable' requires a nuanced foreign economic policy, engaging in strategic Free Trade Agreements while simultaneously protecting domestic industries. This directly relates to GS Paper 2 topics on the impact of global policies on India's interests.