'Economic resilience cannot mean global insulation'

New Delhi: India's pursuit of economic resilience should not entail isolation from global markets, according to PK Mishra, Principal Secretary to the Prime Minister. Mishra emphasized during the 5th Kautilya Economic Conclave that while domestic production may be pricier than obtaining goods from the most cost-effective overseas markets, its advantages only become apparent when disruptions occur.

He stressed that resilience cannot mean cutting oneself off from the world, but rather being capable of remaining open to the global community without becoming overly vulnerable to it.

Mishra noted that the changing economic behavior in response to increased uncertainty includes businesses delaying investments, expanding their supplier base, maintaining larger inventories, and retaining spare capacity. Governments also play a role in building resilience by setting aside reserves, fortifying fiscal buffers, and investing in capabilities that might seem costly under normal circumstances but prove invaluable during crises.

Mishra highlighted that the additional cost of building resilience is increasingly being recognized around the world.

In light of this, Mishra underscored the importance of accurately pricing risks while balancing the extra costs that economies are willing to incur for enhanced resilience. He explained two main methods for assessing risks: the traditional approach, which considers the range and likelihood of various outcomes, encompassing both potential gains and losses; and the second approach, which focuses on the probability of returns falling below a critical or 'disaster' level. Mishra observed that many countries are now favoring the latter method.

However, Mishra cautioned against the misconception that building domestic manufacturing is merely a replacement for imports. He stressed that resilience must go hand-in-hand with productivity and competitiveness. The ultimate goal of fostering domestic capabilities should be to create competitive, scalable, and eventually export-oriented capabilities, not to replace imports at any cost.