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Industrial Policy for Strategic Sectors

PYQs

5

Articles

1

Momentum

15

Phase IFoundation

Background

Overview

This concept is vital for understanding India's economic development strategy, self-reliance initiatives (Atmanirbhar Bharat), trade policy, and the government's role in market intervention to manage strategic vulnerabilities in critical sectors like pharmaceuticals and emerging technologies (AI).

Industrial policy refers to government interventions aimed at promoting specific industries or sectors to achieve economic and strategic objectives, such as fostering domestic manufacturing, enhancing competitiveness, and reducing reliance on foreign supply chains in critical areas.

Phase IIStatic core

Facts & tables

Key facts

PLI Scheme Example

The Production-Linked Incentive (PLI) scheme is an industrial policy in India to promote domestic manufacturing of bulk drugs, aiming to reduce dependence on China.

Challenges of Implementation

NITI Aayog's assessment shows India still sources 65% of critical pharma ingredients from China, indicating that industrial policies create footholds but not instant resilience.

Application to AI

India needs similar strategic interventions in AI to deepen backward linkages to frontier AI and strengthen forward linkages to global markets, mirroring efforts to manage pharma dependencies.

Government's Role in Risk Underwriting

The government should help underwrite geopolitical and concentrated technological risks (e.g., through export credit, hybrid-annuity models) that private firms cannot efficiently bear alone.

Reference table

Examples of Government Risk Underwriting

MechanismPurpose
Export CreditInsures firms against geopolitical risks in international trade.
Hybrid-Annuity ModelsState funds part of long-gestation infrastructure projects, making fixed payments to reduce private capital risk.
Production-Linked Incentive (PLI)Provides incentives for domestic manufacturing to reduce import dependence and boost exports.

Reference table

Static syllabus anchors

TypeReference
Conceptual areaExternal Sector & Capital Flows
Conceptual areaFiscal Policy & Public Debt

Reference table

Institutions & roles

BodyRole
Niti AayogAssesses policy impact
Phase IIIExam lens

Prelims angle

Overview

Prelims angle: Policy measures

Prelims angle: Multi-statement analysis

Quick revision

  • Industrial policy: Government interventions to promote specific industries for economic/strategic goals.
  • PLI scheme: Key example in India to boost domestic manufacturing (e.g., bulk drugs).
  • Challenge: Policies create footholds but require sustained effort for full resilience (e.g., pharma dependence on China).
  • Government's role: Underwrite geopolitical and concentrated technological risks for private firms (e.g., export credit, hybrid-annuity models).
  • Application to AI: Need for similar strategic interventions to build domestic AI capabilities and reduce foreign dependence.

High-confidence PYQs

2023Multi-statement analysis, Factual recall

Consider the following statements : Statement-I : India accounts for 3.2% of global export of goods. Statement-II :Many local companies and some foreign com...

EconomyOpen question
2021Multi-statement analysis, Conceptual understanding

India Government Bond Yields are influenced by which of the following? 1. Actions of the United States Federal Reserve. 2. Actions of the Reserve Bank of Ind...

EconomyOpen question
2019Conceptual understanding, Multi-statement analysis

In the context of India, which of the following factors is/are contributor/contributors to reducing the risk of a currency crisis? 1. The foreign currency e...

EconomyOpen question
2017Terminology-based question, Conceptual understanding

The term ‘Domestic Content Requirement’ is sometimes seen in the news with reference to -

EconomyOpen question
2016Policy measures, Multi-statement analysis

What is/are the purpose/purposes of Government’s ‘Sovereign Gold Bond Scheme’ and 'Gold Monetization Scheme'? 1. To bring the idle gold lying with India hous...

EconomyOpen question

Topic timeline

External Sector & Capital FlowsFiscal Policy & Public Debt
Prelims 2016· Policy measures, Multi-statement analysis

What is/are the purpose/purposes of Government’s ‘Sovereign Gold Bond Scheme’ and 'Gold Monetization Scheme'? 1. To bring the idle gold lying with India hous...

Open question
Prelims 2017· Terminology-based question, Conceptual understanding

The term ‘Domestic Content Requirement’ is sometimes seen in the news with reference to -

Open question
Prelims 2019· Conceptual understanding, Multi-statement analysis

In the context of India, which of the following factors is/are contributor/contributors to reducing the risk of a currency crisis? 1. The foreign currency e...

Open question
Prelims 2021· Multi-statement analysis, Conceptual understanding

India Government Bond Yields are influenced by which of the following? 1. Actions of the United States Federal Reserve. 2. Actions of the Reserve Bank of Ind...

Open question
Prelims 2023· Multi-statement analysis, Factual recall

Consider the following statements : Statement-I : India accounts for 3.2% of global export of goods. Statement-II :Many local companies and some foreign com...

Open question

Reimagining sovereign AI for India’s strategic future

01 Jul 2026 · Industrial policy, exemplified by PLI in pharma, aims to build domestic capabilities and reduce strategic dependence. While effective in creating footholds, it requires sustained effort and government support to underwrite risks, especially in emerging strategic sectors like AI.

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Industrial Policy for Strategic Sectors

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