India Needs To Embrace 'Creative Destruction' In Its Bid To Become Economic Superpower, Says Sanjeev Sanyal—Here’s Why

Sanjeev Sanyal, an economist and the member of the Economic Advisory Council to Prime Minister, has advocated for creative destruction as a crucial driver of India’s rise as a global economic power.

Creative destruction is an economic process where outdated businesses and industries are replaced by innovative and efficient ones, driving long-term growth despite short-term disruptions. Popularized by economist Joseph Schumpeter, it explains how economies evolve through competition and technological advancements.

In his column in the New Indian Express, Sanyal writes that, over a period of time, inefficiencies in economic and natural systems are phased out, eventually paving the way for more competitive and innovative players.

He points out that unlike the US and China, where market leaders change frequently, India’s corporate landscape remains largely unchanged.

Further, the degree to which an economy is competent depends on its ability to allow this churn to take place despite causing any short-run disruptions.

However, he argues, that in India’s case, this churn remains relatively low indicating the deficiency of high levels of innovation and risk-taking.

Comparing India’s top 10 companies in 2005 and 2025, Sanyal noted that seven out of 10 companies have remained on the list.

Sanyal added among the new entrants, Life Insurance Corporation is an old public sector enterprise that happened to be listed recently.

The other two—HDFC and Bajaj Finance—are hardly examples of "new blood", he added.

Drawing a comparison with the United States (US) in a similar time frame Sanyal found out that there is only one company, Microsoft, that has managed to retain its position.

He noted that “Companies like General Electric, Exxon Mobil, AIG and Walmart have been replaced by Meta, Alphabet, Amazon and Tesla.”

He added, “This is what has allowed the US to remain an economic superpower”.

Sanyal then pointed out that India’s picture is not all bleak, he said, “Several large companies such as Jet Airways and Essar Steel have disappeared even as new ones like OYO and Zomato have emerged”.

Sanyal then went on to suggest his recommendations.

He suggested, firstly, “ to change a deeply engrained social attitude that looks with suspicion at risk-taking and innovation.” 

Secondly, he stated that “financial regulations and processes need to allow for a lot more creative destruction as well as emergence of new kinds of financing.”

This, he explains, is necessary because today’s regulations are centred on “investor protection” which hinders the risk-taking potential, thus, putting bars on the innovation.

Thirdly, he suggested that “there should be less protection for the established incumbents in most sectors” which India has been doing since the 1950s through licenses, permits, regulatory complexity, import tariffs etc.

Sanyal also points out that creative destruction should be extended to government as well, where defunct agencies, laws and regulations need to be periodically removed.

"To sum up, India needs to celebrate creative destruction in the economy," he said.

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