Beyond Growth: Why Gujarat Must Guard Against Epipathic Drift
BY: DEVANSHU JHA
PART 1
For nearly three decades, Gujarat has been India’s most enduring industrial success story. From globally connected ports and petrochemical complexes to world-leading pharmaceutical, engineering and renewable energy clusters, the state has demonstrated how policy stability, entrepreneurial dynamism and infrastructure investment can transform an economy. Today, Gujarat’s economy is estimated to grow by 7.4%, while its industrial sector contributes nearly 44% of Gross State Domestic Product (GSDP one of the highest industrial shares among Indian states).
The recently unveiled Viksit Gujarat Industrial Policy 2026 seeks to build on this success. It envisions a USD 3.5 trillion economy by 2047, targets 10 lakh crore of fresh investment, identifies 21 thrust sectors, and places innovation, advanced manufacturing, sustainability and MSME transformation at the centre of Gujarat’s next phase of development.
Yet every successful economy eventually confronts a paradox: growth itself can sow the seeds of structural imbalance. I describe this phenomenon as epipathic drift a condition in which an economy continues to expand while gradually drifting away from the institutional, technological and entrepreneurial foundations that originally powered that expansion.
Unlike recession or financial crisis, epipathic drift is almost invisible. GDP continues to rise, exports remain strong, industries expand and investments keep flowing. The drift occurs beneath these encouraging aggregates, as productivity, innovation, enterprise dynamism, employment quality and environmental resilience begin to evolve at different speeds. The danger is therefore not economic decline but structural imbalance hidden behind impressive headline growth.
It is important, however, to distinguish symptoms from diagnosis.
The argument here is not that Gujarat has already entered a phase of structural drift, nor that every new policy initiative automatically proves its existence. Governments routinely invest in research, MSMEs, emerging technologies and green industries to strengthen competitiveness. Viewed individually, such initiatives simply reflect prudent governance. However, when a mature industrial economy simultaneously prioritises enterprise upgrading, innovation ecosystems, semiconductor capabilities, advanced manufacturing and knowledge-intensive industries, these should be interpreted as early warning signals that policymakers are preparing for future structural constraints.
They are not proof of epipathic drift; rather, they indicate recognition that sustaining industrial leadership increasingly requires capabilities beyond traditional investment-led growth.
The first early warning signal appears in the composition of growth. Gujarat has developed remarkable strengths in petrochemicals, chemicals, pharmaceuticals, engineering, automobiles and renewable energy. These sectors have made the state India’s industrial leader. However, many are capital-intensive. As production becomes increasingly automated, output can grow much faster than employment. The challenge for the next decade is therefore not merely expanding industrial capacity but generating higher-quality, knowledge-intensive employment through advanced manufacturing, industrial design, digital technologies and innovation-led entrepreneurship.
The second signal concerns enterprise evolution. The new Industrial Policy introduces a flexible “Choose Your Incentive” approach and places greater emphasis on helping MSMEs upgrade their technological capabilities, expand markets and become globally competitive. This represents an important philosophical shift from enterprise protection towards enterprise transformation. The long-term success of Gujarat’s MSME ecosystem should therefore be measured not merely by the number of enterprises but by how many evolve into globally competitive exporters, technology developers and specialised manufacturers.
( To be continued)
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.
