<h2><strong>Executive Summary</strong></h2><ul><li><p><strong>Geopolitics has displaced efficiency</strong> as the organising principle of global supply chains. </p></li><li><p><strong>India's historical reliance on cost arbitrage</strong> no longer suffices as a value proposition.</p></li><li><p>The government has identified <strong>chokepoints in critical supply chains</strong> and is designing policy instruments around strategic necessity rather than sectoral convenience.</p></li><li><p><strong>PLI schemes are being recalibrated</strong> to fix key vulnerabilities, signalling a shift towards risk mitigation over scale alone.</p></li><li><p><strong>Private sector investment in R&D</strong> remains negligible despite record profitability, constraining indigenous capabilities in deep technologies.</p></li><li><p><strong>Execution of ambitious missions</strong> in quantum computing, biotechnology and advanced manufacturing is hamstrung by risk-averse bureaucratic structures.</p></li></ul>.<p>Geopolitical realignment has arrived in the boardroom. What was once distant terrain for business leaders is now central to the viability of their supply chains, sectoral strategies and access to capital. India is caught between intensifying great power competition, fragmenting trade corridors and technological barriers imposed by partners and adversaries alike. Against this backdrop, the country's industrial policy architecture is being redesigned at speed, and with it, a new vocabulary of urgency and national interest has entered Delhi. At recent Forum sessions, Rajat Sethi, IMA’s Chief Policy Analyst, examined how geopolitics and the advent of transformative technologies are reshaping government priorities and what India's sunrise sectors represent in this environment. </p>.<h2><strong>Supply Chain Sovereignty: The New Strategic Imperative</strong></h2><p>Global trade has entered an era in which access to components and technology is governed less by commercial logic and more by geopolitical positioning. India's historical middle-road approach – balancing competing powers while remaining non-aligned in substance – is being questioned. The Biden administration openly challenged India's refusal to align fully with Western strategic interests, and Mr Trump’s administration has only intensified this pressure. Countries that once served as diversification options, such as Japan and South Korea, are bound by export controls and agreements that replicate American restrictions on critical technologies. Russia, constrained in its own technological advancement, offers limited recourse. China remains the default option for much of India's industrial sourcing, a reality the government now confronts with greater openness than at any point since the Galwan clash.</p><p>This environment has forced a fundamental reconsideration of industrial strategy. Efficiency maximisation, the mantra of recent decades, has given way to a calculus that privileges resilience and control. PM Modi has convened consultations with industry leaders to map out supply chain vulnerabilities and has directed that bilateral engagements prioritise access to critical inputs over ceremonial diplomacy. Government-to-government meetings now revolve not around broad economic partnership frameworks but around ensuring foundries, rare earth suppliers and advanced component manufacturers remain accessible. The signing of the Pax Silica agreement, a multilateral framework described as the NATO of semiconductors suggests an inescapable trade-off. India gains access to fabrication capacity and raw materials but accepts constraints on its defence trade and technological autonomy in return.</p><h2><strong>Industrial Policy Under Reconstruction</strong></h2><p>The first generation of Production-Linked Incentive (PLI) schemes succeeded in isolated cases but proved insufficient as a systemic framework for transformation. The government realises this limitation and is designing PLI 2.0 with a far more granular understanding of where India lacks capabilities. Atomic clocks, essential for navigation satellites and financial market infrastructure, are one such example. Six of India's nine NavIC satellites have failed due to clock malfunctions, and no domestic supplier of such clocks exists. Ministry deliberations have identified dozens of similar chokepoints across sectors, and the next wave of incentives will be structured around specific gaps rather than broad categories such as electronics or pharmaceuticals.</p><p> A Rs 1 tr R&D fund, administered through structures such as the Anusandhan National Research Foundation, will consolidate previously dispersed capital. Much of it is repackaged funding, but the intent is to create a single point of access for industry and eliminate the fragmented ministerial jurisdictions that have bedevilled technology policy. The fund will operate through multiple channels: VC structures for early-stage ventures, direct grants for indigenous product development, and bundled support alongside PLI disbursements. Sectors such as space, quantum computing, advanced materials, semiconductors, next-generation energy storage and robotics have been allocated dedicated tranches. However, disbursement remains slow. The Quantum Mission, endowed with Rs 60 bn, has released only Rs 500 mn to date, constrained by the reluctance of mission leadership to sign off on large allocations without ironclad assurances of success and accountability. </p><h2><strong>The Absent Variable: Private Capital and R&D Investment</strong></h2><p>Private sector R&D spending in India remains negligible by any serious measure. The top 30 industrial conglomerates, despite recording record profits in recent years, spend amounts on R&D that qualify as rounding errors in their financial statements. JSW Group, with revenues exceeding Rs 1.7 tr, declared Rs 440 mn in R&D expenditure. Infosys announced an Rs 180 bn buyback at a moment when the sector faces structural disruption from AI. Plainly, this signals that the firm has exhausted its own investment thesis; the government has taken note. Ministers have been assigned to approach specific promoters and make the case for visible R&D investment. Non-governmental actors, including senior figures within the RSS, have joined this effort, viewing the mobilisation of private capital into critical technologies as a national imperative rather than a sectoral concern.</p><p> Resistance is not rooted in lack of profitability. Indian business has been wired for decades to avoid risk and prioritise stable, incremental returns over ventures with long gestation periods and uncertain payoffs. The government's impulse is to impose a framework similar to CSR mandates, but enforcement remains elusive. Accounting ingenuity would quickly render any threshold meaningless. What is required is a cultural shift, which may not be possible to achieve simply through policy circulars. The contrast with China is stark. Chinese firms, state-backed and privately held alike, channel enormous sums into R&D under government direction and market incentive structures that reward technological leadership. India has neither the coercive capacity nor the coordinated industrial-financial ecosystem to replicate that model, and the gap shows.</p><h2><strong>Execution Constraints: Bureaucracy, Risk Aversion and Infrastructure Limits</strong></h2><p>Policy intent is one matter; execution is another. The government has set aggressive timelines for delivery of advanced technologies. Mr Modi personally monitors the quantum computing mission and has set a target of producing a 1,000-logical-qubit machine. Even a 100-qubit system requires a supply chain that includes ultra-low temperature refrigeration, precision optics, rare isotopes and microwave control systems, none of which exist at scale in India. Defence research organisations such as HAL have been given notice: any project timeline extending beyond two years is considered dead on arrival. This is consistent with an Elon Musk-style philosophy of urgency, but it collides with the realities of deep technology development, which demands iterative refinement, long-term capital patience and institutional stability.</p><p>Bureaucratic structures are ill-suited to the task. The Union Public Service Commission, which recruits India's administrative cadre, celebrated its centenary this year. The civil service it produces is skilled in procedure and risk minimisation but unskilled in technological fluency or entrepreneurial judgement. Scientists elevated to positions of mission authority are often paralysed by the size of the budgets they control, unwilling to sign off on disbursements for fear of future legal or audit scrutiny. This produces absurd outcomes: funds lie unspent while the very sectors they were meant to support continue to import solutions from abroad. Infrastructure presents additional bottlenecks. The semiconductor fabs sanctioned by the government require enormous quantities of clean water. The Tata plant in Assam has diverted water supplies originally meant for Guwahati, creating local political backlash and raising questions about whether the necessary civic infrastructure was considered before site selection.</p><h2><strong>The Sunrise Sectors: Space, Quantum, Semiconductors and AI</strong></h2><p>The Centre has designated a set of sectors as strategic priorities, sectors where technological leadership and/or self-sufficiency is considered essential to national security and economic sovereignty. Space is one example. Private players such as Agni, staffed by former ISRO engineers, have achieved technical milestones in months that ISRO could not deliver in years, demonstrating the efficacy of market discipline. Defence technology startups are being incubated through vehicles such as iDEX, and some have secured export orders ahead of domestic adoption, reversing the usual pattern. Quantum computing, photonics, advanced sensing technologies and biotechnology have all been identified for targeted support, often drawing on NATO's own critical technology tracker, a list of 54 technologies of which China now leads the US in 52. </p><p>The AI story is more complex. India recognised early that it could not compete in foundational model development due to lack of access to advanced GPUs and fabrication capacity. The government's stated strategy is diffusion rather than development: building applications on top of foreign models while waiting for domestic capability to mature. This is a concession rather than a strategy. The $1 tr valuation drop in AI-linked equities following the release of certain inference tools is a reminder that the market structure is winner-takes-all – and India is not positioned to win here. The AI Mission was coordinated by the Office of the Principal Scientific Adviser and not by the Ministry of Electronics and IT, an unusual arrangement that reflects cross-ministerial complexity and allows for direct oversight by the PMO. Hyper-scalers have committed $200 bn in infrastructure investment, but India's power grid cannot sustain such a load without significant upgrades. Bureaucrats have publicly assured readiness, but the underlying assessment is more sober.</p><h2><strong>What the Boardroom Must Internalise</strong></h2><p>Geopolitics determines which supply chains remain accessible, which partnerships are viable, which technologies can be procured and on what terms. Indian business leaders can no longer separate commercial strategy from strategic alignment. The government is signalling where it will deploy taxpayer capital, where it expects private sector participation and where it will tolerate continued dependence on imports. Organisations that fail to align with these priorities risk finding themselves excluded from policy support or caught in regulatory crossfire. The government has also begun to identify certain firms and sectors as the sovereign stack, entities deemed critical to national security and subject to tighter controls on foreign investment and board composition. This is a dangerous game, one that invites distortion and cronyism, but it is a game already in play globally, and India is learning the rules as it goes.</p><p>2025 forced a series of reckonings: Donald Trump’s trade policies, Operation Sindoor, the China rapprochement, a semiconductor pact and the hollowing-out of IT sector growth. These are not isolated events but symptoms of a world in which the old rules of the game have been suspended. India's demographic dividend, once the centrepiece of every growth projection, is now a liability in an age where AI obviates much of the need for low-cost labour. What remains is hunger, talent and institutional capacity. Whether those prove sufficient depends on how swiftly Indian business translates external pressure into internal transformation, and whether government can build an execution apparatus worthy of its stated ambitions.</p>
<h2><strong>Executive Summary</strong></h2><ul><li><p><strong>Geopolitics has displaced efficiency</strong> as the organising principle of global supply chains. </p></li><li><p><strong>India's historical reliance on cost arbitrage</strong> no longer suffices as a value proposition.</p></li><li><p>The government has identified <strong>chokepoints in critical supply chains</strong> and is designing policy instruments around strategic necessity rather than sectoral convenience.</p></li><li><p><strong>PLI schemes are being recalibrated</strong> to fix key vulnerabilities, signalling a shift towards risk mitigation over scale alone.</p></li><li><p><strong>Private sector investment in R&D</strong> remains negligible despite record profitability, constraining indigenous capabilities in deep technologies.</p></li><li><p><strong>Execution of ambitious missions</strong> in quantum computing, biotechnology and advanced manufacturing is hamstrung by risk-averse bureaucratic structures.</p></li></ul>.<p>Geopolitical realignment has arrived in the boardroom. What was once distant terrain for business leaders is now central to the viability of their supply chains, sectoral strategies and access to capital. India is caught between intensifying great power competition, fragmenting trade corridors and technological barriers imposed by partners and adversaries alike. Against this backdrop, the country's industrial policy architecture is being redesigned at speed, and with it, a new vocabulary of urgency and national interest has entered Delhi. At recent Forum sessions, Rajat Sethi, IMA’s Chief Policy Analyst, examined how geopolitics and the advent of transformative technologies are reshaping government priorities and what India's sunrise sectors represent in this environment. </p>.<h2><strong>Supply Chain Sovereignty: The New Strategic Imperative</strong></h2><p>Global trade has entered an era in which access to components and technology is governed less by commercial logic and more by geopolitical positioning. India's historical middle-road approach – balancing competing powers while remaining non-aligned in substance – is being questioned. The Biden administration openly challenged India's refusal to align fully with Western strategic interests, and Mr Trump’s administration has only intensified this pressure. Countries that once served as diversification options, such as Japan and South Korea, are bound by export controls and agreements that replicate American restrictions on critical technologies. Russia, constrained in its own technological advancement, offers limited recourse. China remains the default option for much of India's industrial sourcing, a reality the government now confronts with greater openness than at any point since the Galwan clash.</p><p>This environment has forced a fundamental reconsideration of industrial strategy. Efficiency maximisation, the mantra of recent decades, has given way to a calculus that privileges resilience and control. PM Modi has convened consultations with industry leaders to map out supply chain vulnerabilities and has directed that bilateral engagements prioritise access to critical inputs over ceremonial diplomacy. Government-to-government meetings now revolve not around broad economic partnership frameworks but around ensuring foundries, rare earth suppliers and advanced component manufacturers remain accessible. The signing of the Pax Silica agreement, a multilateral framework described as the NATO of semiconductors suggests an inescapable trade-off. India gains access to fabrication capacity and raw materials but accepts constraints on its defence trade and technological autonomy in return.</p><h2><strong>Industrial Policy Under Reconstruction</strong></h2><p>The first generation of Production-Linked Incentive (PLI) schemes succeeded in isolated cases but proved insufficient as a systemic framework for transformation. The government realises this limitation and is designing PLI 2.0 with a far more granular understanding of where India lacks capabilities. Atomic clocks, essential for navigation satellites and financial market infrastructure, are one such example. Six of India's nine NavIC satellites have failed due to clock malfunctions, and no domestic supplier of such clocks exists. Ministry deliberations have identified dozens of similar chokepoints across sectors, and the next wave of incentives will be structured around specific gaps rather than broad categories such as electronics or pharmaceuticals.</p><p> A Rs 1 tr R&D fund, administered through structures such as the Anusandhan National Research Foundation, will consolidate previously dispersed capital. Much of it is repackaged funding, but the intent is to create a single point of access for industry and eliminate the fragmented ministerial jurisdictions that have bedevilled technology policy. The fund will operate through multiple channels: VC structures for early-stage ventures, direct grants for indigenous product development, and bundled support alongside PLI disbursements. Sectors such as space, quantum computing, advanced materials, semiconductors, next-generation energy storage and robotics have been allocated dedicated tranches. However, disbursement remains slow. The Quantum Mission, endowed with Rs 60 bn, has released only Rs 500 mn to date, constrained by the reluctance of mission leadership to sign off on large allocations without ironclad assurances of success and accountability. </p><h2><strong>The Absent Variable: Private Capital and R&D Investment</strong></h2><p>Private sector R&D spending in India remains negligible by any serious measure. The top 30 industrial conglomerates, despite recording record profits in recent years, spend amounts on R&D that qualify as rounding errors in their financial statements. JSW Group, with revenues exceeding Rs 1.7 tr, declared Rs 440 mn in R&D expenditure. Infosys announced an Rs 180 bn buyback at a moment when the sector faces structural disruption from AI. Plainly, this signals that the firm has exhausted its own investment thesis; the government has taken note. Ministers have been assigned to approach specific promoters and make the case for visible R&D investment. Non-governmental actors, including senior figures within the RSS, have joined this effort, viewing the mobilisation of private capital into critical technologies as a national imperative rather than a sectoral concern.</p><p> Resistance is not rooted in lack of profitability. Indian business has been wired for decades to avoid risk and prioritise stable, incremental returns over ventures with long gestation periods and uncertain payoffs. The government's impulse is to impose a framework similar to CSR mandates, but enforcement remains elusive. Accounting ingenuity would quickly render any threshold meaningless. What is required is a cultural shift, which may not be possible to achieve simply through policy circulars. The contrast with China is stark. Chinese firms, state-backed and privately held alike, channel enormous sums into R&D under government direction and market incentive structures that reward technological leadership. India has neither the coercive capacity nor the coordinated industrial-financial ecosystem to replicate that model, and the gap shows.</p><h2><strong>Execution Constraints: Bureaucracy, Risk Aversion and Infrastructure Limits</strong></h2><p>Policy intent is one matter; execution is another. The government has set aggressive timelines for delivery of advanced technologies. Mr Modi personally monitors the quantum computing mission and has set a target of producing a 1,000-logical-qubit machine. Even a 100-qubit system requires a supply chain that includes ultra-low temperature refrigeration, precision optics, rare isotopes and microwave control systems, none of which exist at scale in India. Defence research organisations such as HAL have been given notice: any project timeline extending beyond two years is considered dead on arrival. This is consistent with an Elon Musk-style philosophy of urgency, but it collides with the realities of deep technology development, which demands iterative refinement, long-term capital patience and institutional stability.</p><p>Bureaucratic structures are ill-suited to the task. The Union Public Service Commission, which recruits India's administrative cadre, celebrated its centenary this year. The civil service it produces is skilled in procedure and risk minimisation but unskilled in technological fluency or entrepreneurial judgement. Scientists elevated to positions of mission authority are often paralysed by the size of the budgets they control, unwilling to sign off on disbursements for fear of future legal or audit scrutiny. This produces absurd outcomes: funds lie unspent while the very sectors they were meant to support continue to import solutions from abroad. Infrastructure presents additional bottlenecks. The semiconductor fabs sanctioned by the government require enormous quantities of clean water. The Tata plant in Assam has diverted water supplies originally meant for Guwahati, creating local political backlash and raising questions about whether the necessary civic infrastructure was considered before site selection.</p><h2><strong>The Sunrise Sectors: Space, Quantum, Semiconductors and AI</strong></h2><p>The Centre has designated a set of sectors as strategic priorities, sectors where technological leadership and/or self-sufficiency is considered essential to national security and economic sovereignty. Space is one example. Private players such as Agni, staffed by former ISRO engineers, have achieved technical milestones in months that ISRO could not deliver in years, demonstrating the efficacy of market discipline. Defence technology startups are being incubated through vehicles such as iDEX, and some have secured export orders ahead of domestic adoption, reversing the usual pattern. Quantum computing, photonics, advanced sensing technologies and biotechnology have all been identified for targeted support, often drawing on NATO's own critical technology tracker, a list of 54 technologies of which China now leads the US in 52. </p><p>The AI story is more complex. India recognised early that it could not compete in foundational model development due to lack of access to advanced GPUs and fabrication capacity. The government's stated strategy is diffusion rather than development: building applications on top of foreign models while waiting for domestic capability to mature. This is a concession rather than a strategy. The $1 tr valuation drop in AI-linked equities following the release of certain inference tools is a reminder that the market structure is winner-takes-all – and India is not positioned to win here. The AI Mission was coordinated by the Office of the Principal Scientific Adviser and not by the Ministry of Electronics and IT, an unusual arrangement that reflects cross-ministerial complexity and allows for direct oversight by the PMO. Hyper-scalers have committed $200 bn in infrastructure investment, but India's power grid cannot sustain such a load without significant upgrades. Bureaucrats have publicly assured readiness, but the underlying assessment is more sober.</p><h2><strong>What the Boardroom Must Internalise</strong></h2><p>Geopolitics determines which supply chains remain accessible, which partnerships are viable, which technologies can be procured and on what terms. Indian business leaders can no longer separate commercial strategy from strategic alignment. The government is signalling where it will deploy taxpayer capital, where it expects private sector participation and where it will tolerate continued dependence on imports. Organisations that fail to align with these priorities risk finding themselves excluded from policy support or caught in regulatory crossfire. The government has also begun to identify certain firms and sectors as the sovereign stack, entities deemed critical to national security and subject to tighter controls on foreign investment and board composition. This is a dangerous game, one that invites distortion and cronyism, but it is a game already in play globally, and India is learning the rules as it goes.</p><p>2025 forced a series of reckonings: Donald Trump’s trade policies, Operation Sindoor, the China rapprochement, a semiconductor pact and the hollowing-out of IT sector growth. These are not isolated events but symptoms of a world in which the old rules of the game have been suspended. India's demographic dividend, once the centrepiece of every growth projection, is now a liability in an age where AI obviates much of the need for low-cost labour. What remains is hunger, talent and institutional capacity. Whether those prove sufficient depends on how swiftly Indian business translates external pressure into internal transformation, and whether government can build an execution apparatus worthy of its stated ambitions.</p>
