Service provider or strategic power? Economic Survey warns innovation is key to geopolitical leverage

Emphasising the urgency of innovation, the Economic Survey 2025–26 argues that as India recalibrates its manufacturing strategy amid economic transformation, geopolitical uncertainty and rapid technological change, manufacturing capacity must be treated as a strategic national asset.

“The global economy has transitioned from an era of efficiency-driven globalisation to one defined by strategic resilience and technological sovereignty. In this landscape, the ability to innovate is no longer merely a driver of productivity; it has become the primary currency of national security and geopolitical leverage,” the Survey notes.

Failure to ignite this innovation engine, it warns, would carry long-term risks. India could remain a ‘service provider’ to the developed world, exposed to technology denial regimes and vulnerable to supply-chain disruptions.


Despite being the world’s fourth-largest economy, India’s gross expenditure on R&D remains stagnant at around 0.64 percent of GDP, far below the 2.5–5 percent typical of innovation-led economies such as the US, China, and Israel. The constraint, the Survey argues, is not a lack of scientific talent, but weak private-sector collaboration and the inability to translate research into scalable outcomes.

India performs well at Technology Readiness Levels (TRL) 1–3, but a mature industrial economy must deliver TRL 7–9 products. The bottleneck lies in the intermediate stages where prototyping, piloting and characterisation innovation tends to stall. To secure leverage in global supply chains, India must bridge this critical gap between academic discovery and industrial commercialisation. Innovation reform, therefore, must be holistic, addressing not only research funding but also translation, adoption and scale.

A key diagnosis in the Survey is the persistence of a market failure: India’s private sector, historically risk-averse and reliant on technology imports or licensing, has not emerged as the primary driver of R&D. Against this backdrop, the announcement of the Rs 1-lakh crore Research, Development and Innovation (RDI) Scheme and its operationalisation by the Prime Minister in November 2025—signals a clear intent by the Government of India to incentivise private-sector participation and push India towards the frontiers of innovation.

The Survey also makes a strong case for complementing this approach through the creation of Translational Research Centres (TRCs) as shared national assets for piloting and prototyping. TRCs, it argues, should be viewed as essential national infrastructure, akin to physical and digital public infrastructure, capable of lowering the cost and risk of testing, validating, and scaling new technologies for start-ups, MSMEs, industry and academia. Built as long-term assets rather than short-term projects, these centres can ensure continuity and impact across technology cycles.

The ANRF framework can be leveraged to identify, establish, and govern such TRCs as critical national infrastructure. However, the success of India’s innovation reforms will depend on a balanced, system-wide approach, supported by strong governance, clear performance metrics, and transparent accountability mechanisms.

Crucially, the Survey stresses that the ANRF and the RDI Scheme must operate in close coordination, aligning demand signals, research priorities, institutional incentives, standards-setting and public procurement. Such alignment would enable a coherent research-to-deployment pipeline, accelerating the translation of research into scalable, deployable technologies.

Citing data from ASPI’s Critical Technology Tracker, the Survey issues a stark warning: the global technology landscape is fragmenting along geopolitical lines. Capital flows are increasingly aligned with strategic interests, and countries that control critical node, such as semiconductors, advanced materials and APIs, wield “reverse leverage.” India, it cautions, cannot afford to become a client state.

The Survey concludes that India must make a decisive choice between two objectives: defensive sovereignty—shielding itself from supply shocks—and offensive leverage—becoming indispensable in high-technology domains. That choice, it says, can no longer be deferred.