There is an uncomfortable truth buried in the World Bank’s latest intellectual pivot. For decades, the Bank preached the gospel of free markets, open trade, and minimal State intervention to developing nations — while the rich world quietly subsidised, protected, and directed its own industries to global dominance. Now, confronted with the spectacle of the US Inflation Reduction Act, European industrial strategies, and China’s State-capitalist juggernaut, the Bank has changed its mind. Industrial policy, it now concedes, can work. The question is how.
For India, this moment is both a vindication and a prompt for reflection. A vindication, because India has long been derided — including by the Bank — for its protectionist instincts. A prompt, because intellectual legitimacy is not the same as policy effectiveness, and India’s circumstances — its demographic scale, consumption-driven growth model, federal complexity, and strategic autonomy ambitions — demand an industrial policy framework built on its own terms, not borrowed templates.
The fiction of a free-trading global order is over, if it ever truly existed. Using the Global Trade Alert database, analysis of the top 10 economies reveals a striking pattern. From 2010 to 2023, every major economy has become more protectionist. China went from 203 discriminatory policy interventions in 2010 to 899 in 2023. The US, after a brief dip, surged past previous records in the post-Covid scramble. Even Japan, once the most restrained, more than doubled its discriminatory interventions over the same period.
India followed suit, moving from 117 to 232 discriminatory interventions. But here is what gets overlooked: India simultaneously introduced the highest number of liberalising trade and industrial policies among the top 10 — rising from 45 in 2010 to 124 in 2023. And in probabilistic terms, India remains dramatically less protectionist than its peers. In 2023, the US and China had more than ten times higher odds of introducing a discriminatory policy harmful to foreign commercial interests than India did. India — the country routinely lectured about its protectionist tendencies — is, by comparative measure, a relatively open economy among the world’s largest. The narrative of India as a uniquely obstinate protectionist simply does not survive contact with the evidence.
Yet India cannot afford complacency. Because while it may be less protectionist than the US or China, its toolkit looks strikingly different from the economies it is most often compared to. In China, 93% of discriminatory industrial policy interventions take the form of domestic subsidies — pumping money into Chinese firms to drive down costs and power export growth. Tariff barriers and import restrictions account for less than 3% of China’s interventions. India’s profile is different: Tariff measures constitute 22% of its discriminatory interventions, import barriers another 18%.
China’s export-obsessed model was built on a foundation of repressed domestic consumption and suppressed wages – a deliberate political choice to subordinate household welfare to industrial accumulation. India has neither the authoritarian capacity nor, frankly, the desire to replicate that bargain. With private consumption accounting for nearly 60% of GDP, India’s domestic market is not a policy failure to be corrected — it is a structural asset to be leveraged.
The more valid concern is that India relies on tariffs too exclusively — and that its subsidy architecture lacks transparency. Over 80% of India’s corporate subsidies are delivered as foregone tax revenues rather than direct transfers, making them nearly impossible to evaluate or hold accountable.
To its credit, India has recognised this tension and responded with a parallel deregulation drive of genuine institutional ambition. Over 47,000 compliances have been simplified, digitised, decriminalised, or removed altogether since 2020. The Jan Vishwas Acts of 2023 and 2025 together decriminalised hundreds of minor technical offences across dozens of central laws, dismantling the “inspector raj” culture that for decades made Indian firms prefer staying small over risking the scrutiny that came with growth. The Reserve Bank of India (RBI) consolidated nearly 9,000 overlapping circulars into 238 Master Directions. The Securities and Exchange Board of India (Sebi) simplified capital market disclosure requirements. The government raised the turnover threshold for “small companies” tenfold, removing the perverse incentive that had long discouraged firms from scaling up.
Crucially, this is no longer an ad hoc exercise. High-level committees announced in 2025 are now institutionalising the next generation of reforms — covering non-financial regulatory frameworks at the central and deregulation priorities at the state levels — across areas including land, labour, permits, and single-window clearances. The architecture here matters: Reform is being pursued simultaneously at the federal and sub-national levels, recognising that India’s regulatory friction is as much a state-level problem as a central one. These represent a sustained, institutionalised attempt to make the enabling environment match the ambition of the headline schemes.
India must make three pivots rooted in its own reality. First, treat domestic market dominance as a stepping stone, not an endpoint. India’s vast home market is a legitimate launch pad — few countries have the demand base to nurture industries to scale before they face global competition. But protected industries that conquer that market should face a clear internal expectation: Bring down costs, raise quality, and progressively reduce their dependence on shelter. Infant industry protection is defensible; permanent sheltering is not.
Second, make subsidies transparent and time-bound. Foregone revenues hidden in tax codes are a subsidy to opacity itself. Direct transfers tied to productivity benchmarks allow governments to reward success and cut failure — the discipline that separates purposeful industrial strategy from convenience.
Third, continue deepening trade integration through the remarkable FTA momentum India has built. In just the past two years, India has concluded agreements with the UK, the EFTA bloc, Oman, New Zealand, and, most significantly, the EU — described by both sides as the largest trade deal either has ever signed, creating a combined market of nearly $27 trillion. India now has nine FTAs spanning 38 countries. This is an asset to exploit. The task now is ensuring domestic industries use these agreements as a competitive spur rather than treating them as a threat to be defensively managed.
The global circumstances are giving us a remarkable opening: Geopolitical fracture, China-plus-one supply chain diversification, and a belated intellectual consensus that the State has a legitimate role in industrial transformation. India’s challenge now is to build an industrial policy architecture that is honest about what is working, ruthless about what is not, and calibrated to India’s own objectives rather than any external prescription.
Shamika Ravi is member, EAC-PM. The views expressed are personal
