Indian corporate investment is characterised by low R&D intensity and concentration in real estate-linked, regulated, or quasi-monopolistic sectors with a relative lack of willingness and appetite to invest towards long-term risk absorption and become globally competitive, according to the Economic Survey.
In a society undergoing rapid structural change, the private sector's legitimacy will increasingly rest on its ability to marry commercial dynamism with a conscious contribution to nation-building, the pre-Budget tabled in Lok Sabha on Thursday said.
Citing historical records of instances in different parts of the world where business leaders and firms acted not merely as profit-seeking entities but as institutional partners in broader national projects at various stages, it said the Indian private sector needs to recognise its role in shaping social trust and institutional credibility.
The Survey said the Indian corporate sector operates "in a hybrid zone where rents are available, enforcement is uneven, and political mediation substitutes for market discipline".
"...there is a relative lack of willingness and appetite to invest efforts towards long-term risk absorption and becoming globally competitive.
"Regulatory arbitrage, protected margins, and firm-specific accommodations often dominate productivity enhancement, scale competition, or learning-by-doing," it said.
This preference is rational in an environment where downside risks are socialised through bailouts, banking forbearance, tariff protection, or retrospective renegotiation, it added.
"A corporate sector that externalises risk to the state does not exert pressure for higher state capacity; instead, it generates demand for discretion. Discretion, in turn, corrodes rule-based institutions," the Survey noted.
Stating that capital allocation horizons remain short among Indian corporates, it said, "Despite notable exceptions, Indian corporate investment is characterised by low R&D intensity, caution in frontier manufacturing, and concentration in real estate-linked, regulated, or quasi-monopolistic sectors."
This reflects not merely culture, but governance structures -- family control, succession orientation, weak managerial labour markets, and underdeveloped long-horizon capital, it noted.
The Survey pointed out that "when firms do not require fast courts, skilled labour at scale, or predictable regulation to generate returns, they cannot function as a forcing mechanism for institutional upgrading".
The Survey cited examples of how various business leaders and firms in post-war America, Germany, and Japan acted not merely as profit-seeking entities but as institutional partners in broader national projects, particularly during periods of reconstruction or strategic transformation.
"For India, this implies a private sector that is willing to accept longer investment horizons in innovation, skills, and quality; one that treats formalisation, productivity, and technological deepening as collective goods rather than optional strategies; and one that recognises its role in shaping social trust and institutional credibility," it said.
It calls for business leadership that is comfortable with competition at global standards, that reinvests success into capability building rather than financial engineering, and that frames corporate ambition in terms of what it does for India's productive base, employment quality and international standing, the Survey said.
In a society undergoing rapid structural change, the private sector's legitimacy will increasingly rest on its ability to marry commercial dynamism with a conscious contribution to nation-building, not as a slogan, but as a guiding discipline in strategy, capital allocation and organisational culture, it noted.
