Kotak Institutional Equities has called for a “new independence movement” for India, arguing that the country must urgently reduce its dependence on foreign capital, imported energy, defence equipment, and overseas technology. The strategy report, released on 20 June, warns that rising geopolitical tensions and accelerating global protectionism are rapidly narrowing the options available to India’s policymakers.

Why the Warning Now

The report contends that shifting global trade dynamics, resource nationalism, and tightening restrictions on technology transfers have collectively eroded India’s ability to lean on imports and external financing as a growth crutch. “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 stated.

Kotak analysts noted that India’s external sector remains structurally vulnerable despite relatively stable headline 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 over the same period — a gap that has been bridged largely by capital inflows rather than export strength.

Manufacturing: A Critical Gap

The report identifies domestic manufacturing as a central pillar of any credible self-reliance strategy. Manufacturing currently contributes only about 13 per cent of India’s GDP — one of the lowest shares among major economies. Kotak analysts argue that expanding industrial capacity and boosting domestic value addition are no longer optional; they are economic necessities if India is to reduce its dependence on imported goods and shore up macroeconomic stability.

This comes amid repeated government targets to raise manufacturing’s GDP share, none of which have been decisively met over the past decade.

Energy Dependence: The Biggest Vulnerability

Energy imports represent the most acute pressure point. India currently imports nearly 85 per cent of its crude oil requirements and approximately half of its natural gas needs. Imported energy has accounted for more than half of India’s trade deficit in recent years, leaving the economy exposed to global price shocks and supply disruptions — risks that have grown more pronounced since the Russia-Ukraine conflict reshaped global energy markets.

Kotak analysts identified renewable energy as the most viable long-term solution. The report projects that clean energy could account for 40 per cent of India’s energy mix by FY2056, with the share of domestically sourced energy rising from 63 per cent to 72 per cent over the same period.

Services Growth Model Under Threat

The report also flags an underappreciated risk to India’s services-led growth engine. Heavy reliance on software exports and overseas remittances — long seen as India’s comparative advantage — could become a vulnerability as artificial intelligence increasingly disrupts traditional service industries. The warning adds urgency to the case for manufacturing diversification, since a weakening services sector cannot be assumed to compensate for structural import dependencies indefinitely.

What Needs to Happen Next

Kotak’s analysis points toward the need for “more radical policy actions” — a phrase that suggests incremental PLI-style incentives may be insufficient on their own. Analysts are expected to watch upcoming Union Budget signals, defence indigenisation timelines, and the pace of renewable energy capacity addition as early indicators of whether policymakers are moving at the speed the report demands.