For much of the past three decades, businesses and governments organised themselves around efficiency. Supply chains grew longer, inventories leaner, and production more concentrated wherever costs were lowest. Capital was allocated on the assumption that trade routes would remain open, energy supplies secure, and geopolitical disruptions episodic. That assumption has been tested repeatedly. The pandemic, the Russia-Ukraine war, disruptions in the Red Sea, tariff conflicts, and the latest hostilities in West Asia have shown that shocks are no longer exceptional events to be ridden out. They are becoming part of the operating environment. Resilience, therefore, can no longer be treated merely as insurance against unlikely events; it must be recognised as an economic asset.
India has experienced these vulnerabilities particularly sharply. More than 40% of its crude oil imports pass through the Strait of Hormuz, leaving the economy exposed to disruption at one of the world’s most sensitive chokepoints. The latest tensions have pushed up crude prices and shipping and insurance costs, while putting pressure on the rupee. The consequences extend from imported inflation and a wider current account deficit to difficult fiscal choices. Elsewhere, restrictions involving technology, semiconductors, and critical minerals have revealed a different class of dependence. As economist Saumitra Bhaduri argued in these pages, the next chokehold may be technological rather than geographical. The cheapest supplier is not necessarily the cheapest if production stops when that supplier becomes unavailable.
That does not mean India should pursue self-sufficiency indiscriminately. Resilience must not become a convenient justification for protectionism. Attempting to manufacture everything domestically, regardless of comparative advantage, would raise costs, weaken competitiveness, and ultimately hurt exports. Nor does every company need multiple factories and warehouses merely to prepare for the worst. The objective should be diversification, not autarky. India needs multiple sources of energy, critical minerals, and strategic components; companies need alternative suppliers and logistics routes; and banks need diversified funding sources. Strategic reserves could also extend beyond crude oil to liquefied natural gas, fertilisers, critical minerals, and other essential inputs. Some redundancy that appears expensive in normal times can prove remarkably cheap during a crisis.
There is an opportunity in this shift. As global companies redesign supply chains around resilience rather than cost alone, India can position itself as an alternative manufacturing and services base. But it will capture this “resilience premium” only if it is itself seen as dependable. That requires reliable power, ports, and logistics, competitive tariffs, predictable taxation and regulation, and greater policy stability. Production-linked incentives can help create capacity, but subsidies cannot indefinitely compensate for weaknesses in the business environment.
Resilience must extend to technology as well as critical public infrastructure should not rely exclusively on a single foreign technology provider or supply chain. The traditional trade-off between efficiency and resilience, therefore, needs recalibration. Eliminating every buffer may maximise returns in normal times but impose far larger costs when conditions change. Excessive redundancy, on the other hand, can destroy competitiveness and encourage rent-seeking. The task for policymakers and corporate boards is to identify critical vulnerabilities and insure selectively against them. India cannot predict whether the next disruption will come through oil, trade, technology, climate, or geopolitics. It can, however, make itself better able to absorb the shock. In an increasingly disorderly world, resilience is no longer merely the price paid for safety. Properly designed, it can become a source of competitive advantage.