Beyond Growth: Why Gujarat Must Guard Against Epipathic Drift

BY: DEVANSHU JHA

(PART 2)

A third dimension is innovation intensity. Manufacturing leadership does not automatically produce research leadership. Significantly, Gujarat has witnessed a sharp increase in patent filings in recent years, reflecting growing innovation activity. At the same time, the Industrial Policy places unprecedented emphasis on R&D centres, intellectual property, university-industry collaboration and advanced technologies. The 2026-27 Budget also strengthens research infrastructure alongside investments in semiconductor ecosystems and innovation capacity. These developments suggest that Gujarat is attempting to build technological capabilities before future competitiveness becomes constrained.

The fourth signal concerns how industrial success is measured. Traditionally, investment commitments have dominated policy discourse. Yet a mature industrial economy must increasingly judge success by the quality not merely the quantity of investment. Productivity growth, technological spillovers, export sophistication, resilience of supply chains and value addition are becoming equally important measures of economic performance.

Export competitiveness illustrates this transition. Gujarat already accounts for a remarkably large share of India’s exports and handles around 40% of the country’s port cargo, giving it an exceptional logistical advantage. The next stage, however, is to move beyond conventional manufacturing into advanced materials, semiconductor ecosystems, precision engineering, biotechnology, robotics and artificial intelligence precisely the sectors prioritised under the Industrial Policy.

Environmental resilience represents another frontier. Climate uncertainty, water stress and resource-intensive production are no longer environmental concerns alone; they are industrial competitiveness concerns. Encouragingly, the new policy explicitly promotes green industrial parks, wastewater recycling, circular economy practices and cleaner production technologies. In an era where global supply chains increasingly reward sustainable production, these reforms are investments in future competitiveness rather than regulatory obligations.

The policy’s broader philosophy is equally significant. Rather than functioning merely as an incentive programme, it increasingly positions the state as a strategic partner in industrial upgrading. This reflects a deeper evolution in development strategy: governments create enabling ecosystems while firms drive innovation and investment. Such collaboration will become essential as industries transition from scale-based competitiveness towards knowledge-based competitiveness.

Preventing epipathic drift therefore requires monitoring a broader dashboard of economic performance. Alongside GSDP growth and investment commitments, policymakers should regularly evaluate labour productivity, innovation outcomes, MSME graduation, export sophistication, environmental efficiency and enterprise capability. An economy should be considered vulnerable to epipathic drift not because one indicator weakens, but when several structural capabilities fail to advance proportionately despite continuing GDP growth.

History offers an important lesson. Prosperous economies rarely lose leadership because they stop growing. More often, they lose leadership because they continue growing while neglecting the structural capabilities that sustained their earlier success. Institutional adaptation, technological upgrading and continuous innovation not growth alone determine whether prosperity endures.

Gujarat enters this next phase from a position of exceptional strength. It contributes more than 18% of India’s industrial output, enjoys one of the country’s highest per capita incomes, and remains the benchmark for manufacturing-led development. The challenge before policymakers is therefore not to preserve yesterday’s model but to build tomorrow’s.

The real question is no longer whether Gujarat can attract another lakh crore of investment. Its track record suggests that it can.

The more consequential question is whether Gujarat can convert industrial scale into innovation leadership, enterprise upgrading, climate resilience and knowledge-intensive employment.

The next chapter of Gujarat’s success will not be written by the factories it builds, but by the capabilities it creates. Economies seldom lose leadership because they stop growing; they lose leadership because they stop evolving. Preventing epipathic drift is therefore not about slowing growth hit is about ensuring that growth remains balanced, adaptive and future-ready.

Devanshu Jha is a  public policy expert and thought leader .He is an alumnus of London School of Economics, Lee Kuan Yew School of Public Policy  and IIM RANCHI.