Anmol Rattan Singh and Agastya Shukla
When the 2025 Nobel Prize in Economics was being awarded to Joel Mokyr, Philippe Aghion, and Peter Howitt for their seminal work on innovation-driven growth and creative destruction, the committee’s message was clear: economic growth cannot be taken for granted as it depends on the constant renewal of ideas, firms, and, most importantly, industries. As the rhetoric of expansive state and activist innovation policy catches hold across the globe, a core ‘dilemma’ in modern economic governance is to reconcile the ‘restraining state’ (competition policy) with the ‘mobilizing state’ (industrial policy). The 2026 Budget holds a clear footing that the long-standing adversarial framing between competition law and industrial policy needs to be replaced by a logic of coordinated market construction. The allocation of Rs 12.2 lakh crore to public capital expenditure and its explicit use of production linked missions, logistics corridors, and risk-sharing financial instruments to shape market structure, rather than regulating it merely, is a welcome move.
Not long back, Jean Tirole had argued in his call for ‘participatory antitrust’, that this ‘dilemma’ no longer fits a world of technological disruption, fragmented supply chains, and climate imperatives. Such conditions are directly targeted in the 2026 Budget through manufacturing missions, energy security schemes, and logistics corridors. Globally, there have been calls for more adaptive, techno-globalist and public interest driven competition policies that concomitantly target public goods and simultaneously, there is a building narrative towards a more ‘polycentric approach’ which helps accomplish more non strictly economic objectives like the strategic autonomy, regional development and, green transition. This notion has been operationalised through a ₹20,000 crore Carbon Capture, Utilisation and Storage (CCUS) scheme linking climate objectives with industrial production and injecting funds in semiconductors, rare earth magnets, electronics components, chemicals, and textile industries.
Conventional wisdom legitimizes two state interventions. First, research policy upstream and second, the competition policy downstream, all while dismissing the middle ground where production occurs. But this missing middle is precisely where modern economic strategy must operate. The IMF’s Managing Director, Kristalina Georgieva recently described policy uncertainty as the defining challenge of the decade in the VUCA landscape. She identified four key elements contributing to economic stability: enhanced policy foundations, business sector flexibility, less intense tariff implications than anticipated, and favourable financial environment. Here, business flexibility and favourable financial environment become especially relevant in the context of a federal India where there is a huge variance in the industrial geography and development as seven of the 34 states hold 60 percent share in terms of both units and workers. This spatial imbalance is addressed through the creation of City Economic Regions, seven high-speed rail ‘growth connectors’, the Purvodaya East Coast Industrial Corridor, and expanded freight and inland waterway networks linking mineral regions, ports, and industrial centres.
In India, for decades, high profits and market concentration were seen as red flags and subsequent was the assessment of such concentration via quantitative heavy assessments. In its adaptive practice, the Hon’ble Supreme Court (SC) in its judgement of Competition Commission of India (CCI) vs Schott Glass India & Anr. (2025) has mandated ‘effects based analysis’ and thus, the CCI would gradually be considering effects based and innovation sensitive analysis apart from the traditional Herfindahl-Hirschman Index (HHI) thresholds of market concentration. This judicial inflection reflects a wider intellectual shift noted by Diane Coyle, who argues that competition policy must evolve beyond a technocratic fixation on consumer surplus to embrace its role as a strategic instrument of industrial renewal. India’s annual manufacturing exit rate is just 3.1 percent, one of the lowest globally. This result is a long mark of inefficient firms that limit full-time job creation, and unexpectedly capital-intensive production.
We understand that institutional exit barriers are a central cause for the slow closures, discouraged entry, and the slump in aggregate productivity. Even when firms are compliant and litigation-free, voluntary closure takes an average of 4.3 years, nearly three of which are spent securing clearances and refunds from the Income Tax Office, GST authorities, and Provident Fund administration. Complications such as worker layoffs or tax disputes extend this timeline further. By contrast, voluntary liquidation takes roughly 12 months in Singapore, 12–24 months in Germany, and 15 months in the UK. Two bottlenecks dominate: procedural bankruptcy laws and rigid labour regulations that, while protective, often lock capital and labour in low-productivity firms. Structural reforms in bankruptcy, labour, and tax administration are essential to accelerate voluntary exit and facilitate churn.
As India transitions into an adaptive industrial ecosystem, the test of modern economic governance lies in ensuring that innovation led market-concentration remains contestable and importantly, reversible. The core question for Indian antitrust is no longer whether dominance exists, but how it evolves in a world defined by data, algorithms, and global value chains. The adaptive narrative of competition policy must therefore integrate industrial design, data governance, and institutional agility with an
aim to not just prevent concentration, but to ensure that every concentration carries within it the seeds of its own disruption. Globally, leading thinkers such as Mariana Mazzucato and Dani Rodrik have argued for an entrepreneurial state that corrects both market and coordination failures.
This is reflected in the creation of the Infrastructure Risk Guarantee Fund, a Rs 10,000 crore SME Growth Fund, credit guarantees through CGTMSE for invoice discounting, and securitisation of MSME receivables via TReDS. Such measures expand the state’s role as risk-absorber, economic architect and investor of first resort. Standing at the cusp of a new thinking that is required for the ability of public institutions to not only share in the risks, but also the rewards of business dynamism. This might lead to new thinking on how to achieve growth that is not only led by innovation but also dynamic efficiency.
Anmol Rattan Singh is the Co-founder and Agastya Shukla is Program Associate of PANJ Foundation, a Punjab based policy research think tank.