Not all import substitution is desirable: Survey

New Delhi, Jan 29 (PTI) Not all import substitution is desirable, and not all forms of protection support long-term competitiveness for domestic industries, the Economic Survey said on Thursday.

It said that Swadeshi is inevitable but it is a disciplined strategy rather than a blanket doctrine.

The most persistent objection to Swadeshi-oriented policies is not ideological but empirical, it said.

It added that India's own history, like that of many developing countries, offers ample examples where protection bred complacency, entrenched inefficiency, and insulated firms from global competition.

"Not all import substitution is desirable, and not all forms of protection support long-term competitiveness," the survey said, adding import substitution is justified when domestic production is already feasible at reasonable cost but is impeded by non-economic factors such as coordination failures or legacy regulatory burdens.

These conditions differentiate intelligent import substitution (conditional protection) from indiscriminate sheltering of domestic incumbents, it said.

It also said that the next phase of industrialisation will require a calibrated shift from a model centred mainly on import substitution towards one focused on scale, competitiveness, innovation and deeper integration into global value chains (GVCs).

"Rather than seeking complete self-reliance in every segment, India needs to build strategic resilience through diversification and creating depth of capabilities," it said.

This requires an increase in private sector investment in R&D, technology adoption, skills, and quality systems.

"MSMEs will be crucial in this journey, evolving from micro-scale production toward deeper participation in formal and export-linked supply chains," the Survey added. PTI RR MR