India needs ‘new independence movement’ to cut reliance on imports, foreign capital: Kotak report

New Delhi, June 20 (SocialNews.XYZ) India needs a “new independence movement” aimed at reducing the country’s dependence on foreign capital, imported energy, defense equipment and overseas technology as rising geopolitical tensions and growing protectionism reshape the global economy, according to a strategy report released by Kotak Institutional Equities.

The report argues that changing global trade dynamics, increasing geopolitical conflicts, resource nationalism and tighter restrictions on technology transfers have significantly narrowed India’s ability to rely on imports and external financing. As a result, the country needs stronger domestic manufacturing capabilities and greater economic self-reliance.

“India has been managing its high external dependencies through imports. However, the option of imports is becoming narrower, which necessitates more radical policy actions to reduce external dependencies,” the report said.

Kotak analysts noted that India’s external sector remains vulnerable despite relatively stable current account balances. The country’s trade deficit averaged 6.4 per cent of GDP between FY2016 and FY2026, while the current account deficit averaged around 1 per cent during the same period.

The report also highlighted emerging risks to India’s services-led growth model, warning that heavy dependence on software exports and overseas remittances could become a vulnerability as artificial intelligence increasingly disrupts traditional service industries.

According to the study, expanding domestic manufacturing has become an economic necessity. Manufacturing currently contributes only about 13 per cent of India’s GDP, one of the lowest shares among major economies. Increasing manufacturing capacity and boosting domestic value addition would help reduce dependence on imported goods while strengthening macroeconomic stability, the report said.

Energy dependence remains another major challenge for the Indian economy. The report estimates that the country imports nearly 85 per cent of its crude oil requirements and about half of its natural gas needs. Imported energy has accounted for more than half of India’s trade deficit in recent years, making the economy vulnerable to global price shocks and supply disruptions.

Kotak analysts identified renewable energy as the most viable long-term solution to reducing external dependence. The report projects that clean energy could account for 40 per cent of India’s energy mix by FY2056, while the share of domestically sourced energy is expected to increase from 63 per cent to 72 per cent during the same period.

Source: IANS