There is a silent storm gathering on India’s economic horizon—and this time, the Reserve Bank of India must do more than batten down the hatches.
Global uncertainties are no longer theoretical risks on PowerPoint decks. The walling of economies against immigration, the spectre of a full-blown Iran–Israel conflict, and the flatlining of Europe’s economic engine are converging into a perfect storm. One that will pressure our foreign exchange reserves, spike import bills, and choke export markets.
We must ask ourselves: Who will act as India’s economic sentinel—both to absorb the shock and to shape the path forward?
Our foreign exchange reserves—though presently comfortable—are already showing signs of stagnation. With energy prices rising, India’s energy import dependence (over 85%) becomes a major drain. Add to that our chronic over-reliance on imported white goods components, electronics, defence parts, and now even EV batteries and chips, and the leak becomes a flood.
We import what we can—and manufacture what we mustn’t. Moulded luggage, umbrellas, toys, low-end sensors—all steadily eroding our reserves for no justifiable reason.
And yet, we have no single institution assigned the task of plugging these leaks.
There’s another quieter crisis we aren’t addressing: India is not future-proofed.
As the world marches toward AI, EVs, Robotics, and Quantum Computing, India risks being locked into legacy technologies unless we take deliberate steps today. Our industries will not survive if we merely substitute imports for today’s products while the global supply chain shifts to next-generation platforms.
This is not just about industrial policy—it’s about adaptation economics. Someone must forecast what sectors will become obsolete, identify what technologies are still scalable, and nudge capital, R&D, and credit flows toward sunrise sectors.
That “someone” must be the RBI.
Why? Because only the RBI can assess where capital is flowing, what technologies banks are funding, and whether Indian industries are being left behind in debt-fuelled sunset sectors. Just as it audits risk and liquidity, it must now also audit technological relevance.
We cannot afford to have banks lending to fossil-heavy, tech-obsolete industrial lines while avoiding EV value chains, AI-driven manufacturing, or quantum-resistant cybersecurity. RBI must issue guidelines, ratings, and incentives to push banks and NBFCs to align with national tech strategy.
This is exactly what central banks in Singapore and the UK have started doing—building regulatory sandboxes, green-tech corridors, and digital innovation maps that align lending with economic evolution.
Today, India’s industrial direction is shaped by siloed committees. Indigenisation targets come from one ministry, incentives from another, while trade permissions get approved in isolation. Nobody maps the macroeconomic or technological impact across sectors. There is no institutional compass that reads: “This sector will die in five years. That one needs sovereign push. And this technology is India’s next bet.”
This vacuum has cost us dearly.
Consider the AC compressor story. Despite being one of the world’s top AC markets, India continues to import compressors worth thousands of crores annually, primarily from China. There was no strategic push to compel OEMs to localise. No platform to invite global leaders to set up shop. No coordination to build domestic supply chains. Only duty tweaks and lukewarm PLI schemes. The result: we lost the window of opportunity to develop self-reliant mass manufacturing in one of the fastest-growing sectors.
Contrast this with the story of South Korea after the 1997 Asian Financial Crisis. With reserves plummeting and IMF conditions tightening, the Bank of Korea, in tandem with the Ministry of Finance and Industry, didn’t just stabilise the Won—it actively co-created industrial revival.
The central bank:
As a result, within a decade, Korea moved from a crisis-prone borrower to a global tech and manufacturing powerhouse—anchored by a proactive central bank and coherent national vision.
So why RBI?
Because no other institution in India has:
The RBI can’t build factories. But it can create conditions where factories must be built—by tracking imports that threaten reserves, curating capital access for strategic goods, and collaborating with ministries to time regulatory incentives.
We must no longer view the RBI merely as a watchdog of inflation. It must now become the fulcrum of industrial strategy, with a direct role in conserving foreign exchange, fast-tracking indigenisation, and preparing India for the next technological leap.
India needs a permanent Economic Acceleration Platform, housed within the RBI, bringing together:
This platform must track import dependency items, review financial incentives, and enable joint ventures—not just paper policies. For instance, why not have the RBI curate and back a JV between Adani and a global leader in moulded luggage, using Indian MSMEs to build a resilient, export-ready ecosystem?
This is the kind of vision Singapore’s MAS, the Bank of England, and even the European Central Bank are adopting—with sandboxes for innovation, green finance strategies, and sovereign tech funds.
India cannot afford to drift. With volatile geopolitics and eroding trade surpluses, strategic manufacturing is national security.
In short, we need the RBI to be more than a guardian of yesterday’s balance sheets. We need it to be a visionary architect of tomorrow’s economy.
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