Governing for the India That Can Be: India’s Political Shift From Managing Problems to Building Solutions

There are two fundamentally different ways to approach public policy. One begins with the country as it exists, identifies its limitations and designs programmes that can function within those constraints. The other begins with a more difficult question: what must be built so that those limitations no longer determine what the country can do?

Both approaches have a legitimate place in government. A state cannot ignore present realities because roads that do not exist cannot carry military convoys, households without bank accounts cannot participate fully in digital finance, and industries without manufacturing capacity cannot suddenly produce sophisticated equipment. Yet there is a profound difference between recognising a limitation and accepting that limitation as permanent.

India’s development experience repeatedly illustrates this distinction. Digital payments, financial inclusion, border infrastructure, defence manufacturing, space technology and semiconductor policy all show how dramatically outcomes can change when public policy is designed not merely around existing capacity, but around the deliberate creation of new capability.

When Existing Reality Shapes the Policy Imagination

The debate over digital payments during the demonetisation period captured the doubts surrounding India’s readiness for a rapid transition towards electronic transactions. Former Finance Minister P. Chidambaram, speaking in December 2016, questioned whether the country possessed the infrastructure required for such a transformation. He asked, “Which country has cashless economy? Does the US? Does Singapore have it? Where is electricity in this country? Where are the machines?” Contemporary reporting also recorded his argument that attempting to push even very small-value transactions into cashless modes was unrealistic given the conditions then prevailing.

The concerns themselves reflected genuine conditions. Banking penetration was uneven, merchant acceptance infrastructure remained limited, mobile internet had not reached its present scale and millions of Indians still relied almost entirely on cash for everyday transactions. The more interesting question, however, is not whether those limitations existed, because they clearly did. The real question is whether they represented permanent characteristics of India or problems that could be systematically removed.

The Vegetable Vendor Became the Test

For digital payments to transform India, success could not be measured by whether salaried professionals in metropolitan cities could pay electronically. The real test was whether a roadside vegetable vendor, neighbourhood tea shop, autorickshaw driver, village merchant or small farmer could receive money electronically without expensive equipment, complicated banking procedures or high transaction costs.

That required far more than a payment application. Bank accounts had to reach people previously outside the formal banking system, mobile connectivity had to extend across rural India, identity infrastructure had to interact securely with financial services, banks had to become interoperable, and merchants needed an acceptance mechanism that did not require conventional card terminals. What today appears almost effortless at the point of payment is therefore the visible surface of a much larger institutional transformation.

UPI Changed What Was Considered Possible

The Unified Payments Interface began operations in 2016 with only 21 participating banks, and transaction volumes during its early months were tiny compared with what followed. By July 2026, UPI connected 741 banks and processed approximately 2,365.8 crore transactions in a single month, representing around ₹29.87 lakh crore in value. UPI accounted for approximately 84% of India’s digital-payment transactions by volume in FY2025-26.

The importance of these numbers goes beyond the success of a payment technology. They show that behaviour previously constrained by infrastructure, transaction costs and banking penetration can change when those constraints are attacked simultaneously. Policy did not wait for India to become perfectly prepared for digital payments. Instead, infrastructure was built so that digital payments themselves became practical.

Financial Inclusion Had to Be Built First

A national digital-payments system cannot function when large sections of the population remain outside formal banking. Expanding access to bank accounts therefore became an essential part of the digital infrastructure.

By August 2026, more than 59 crore Jan Dhan accounts had been opened. Around 56% were held by women, while approximately 78% were in rural and semi-urban areas. Official data also showed that 99.92% of inhabited villages had access to a banking outlet within five kilometres.

This expansion helps explain why digital payments eventually moved beyond metropolitan India. UPI was only the final interface. Beneath it stood banking access, digital identity, mobile connectivity, business correspondents and an expanding financial network. The policy lesson is straightforward: low banking penetration was not treated as proof that digital finance could not succeed. Low banking penetration itself became a problem to be solved.

Connectivity Followed the Same Logic

Digital inclusion also depended on telecommunications infrastructure reaching areas where commercial incentives alone had not always produced sufficient connectivity. By August 2026, around 2.21 lakh Gram Panchayats had been made service-ready under BharatNet, while Common Service Centres had expanded across the country. Government programmes simultaneously extended telecommunications coverage into rural, remote and strategically important areas.

Infrastructure becomes easy to overlook once it succeeds because people eventually talk about applications rather than optical fibre, towers, power supply and network backbones. Yet without those underlying systems, the idea of electronic payments reaching remote villages would have remained an aspiration rather than an everyday reality.

From Indian Experiment to Global Infrastructure

The transformation becomes even more striking when viewed internationally. By July 2026, UPI-related acceptance or cross-border payment arrangements were active in 11 foreign countries, while additional payment connectivity continued to expand.

India’s UPI system was estimated to account for roughly 49% of global real-time payment transaction volume in 2025. A system initially built to solve an Indian problem eventually became something other countries wanted to connect with.

The policy journey moved through several stages: provide access, encourage adoption, achieve scale, build trust and then export the infrastructure itself. This progression illustrates how domestic capability, once sufficiently mature, can become an international asset.

The Larger Lesson From Digital Payments

The important point is not that earlier concerns about infrastructure were irrational. They were based on the India visible at that moment. The transformation came from refusing to assume that the India visible at that moment represented the permanent limits of the country.

Electricity could expand, telecommunications infrastructure could expand, bank accounts could reach more households, payment acceptance could become cheaper, smartphones could become widespread and banks could be connected through an interoperable platform. Once those conditions changed, the answer to the original question changed with them.

That is the distinction between designing policy around an existing constraint and designing policy to eliminate the constraint.

A Similar Debate Once Surrounded India’s China Border

The same contrast between adapting to limitations and changing them appeared much earlier in India’s approach to its northern border. During a Rajya Sabha debate on 6 September 2013, then Defence Minister A.K. Antony made an unusually candid acknowledgement about earlier strategic thinking within India’s defence establishment.

He said that the older theory had been that “it’s safe and correct policy not to develop border areas”, adding that in earlier times “undeveloped borders were considered the safest and protected.” Antony then noted that China had begun developing its capabilities and infrastructure years earlier, forcing India to reconsider its own approach.

The logic behind that earlier doctrine was not entirely irrational. Poor roads could theoretically slow an invading force, difficult terrain could itself act as an obstacle, and extensive infrastructure close to a contested frontier might also become useful to an adversary if territory were lost.

The strategic weakness of that approach became increasingly obvious once China built roads, railways, airfields and logistics infrastructure on its side of the frontier. Infrastructure that might facilitate an attacker could equally determine how quickly the defender could move troops, artillery, armour, air-defence systems, fuel and supplies.

The Border Infrastructure Gap Became an Operational Problem

Official Indian assessments were already acknowledging the scale of Chinese infrastructure development by 2011. The Ministry of Defence stated that China was constructing strategic roads, railway lines and airfields close to the Line of Actual Control, improving its military capability. The same official reply said India had begun developing roads, rail links, forward airfields and other infrastructure to address its own security requirements.

By February 2014, the government had entrusted the Border Roads Organisation with 61 strategic roads along the India-China border, while acknowledging the need to accelerate infrastructure construction. The underlying strategic question had therefore changed. The issue was no longer whether difficult terrain provided protection, but whether India could move forces rapidly enough through that terrain when required.

Border Roads Became Part of Defence Capability

The subsequent expansion of border infrastructure illustrates what happens when the policy objective shifts from preserving remoteness to overcoming it. Official data show that between 2017 and 2022 alone, the Border Roads Organisation constructed approximately 2,088 kilometres of new roads along the India-China border, involving expenditure of more than ₹15,477 crore.

The process continued beyond individual road projects. Tunnels, bridges, advanced landing grounds and all-weather routes increasingly became part of a broader logistics architecture intended to move military formations and supplies through difficult Himalayan terrain.

By January 2026, the government reported that BRO had built more than 64,100 kilometres of roads, 1,179 bridges, seven tunnels and 22 airfields since its establishment. During FY2024-25 alone, BRO recorded expenditure of ₹16,690 crore, its highest annual expenditure to that point.

Forward Infrastructure Now Serves the Opposite Strategic Logic

The contemporary doctrine is almost the reverse of the older assumption described by Antony. Instead of treating remoteness as a form of protection, modern planning increasingly treats connectivity as essential to deterrence.

Roads allow troops to move, bridges carry heavy equipment, tunnels preserve year-round access and advanced landing grounds shorten the time required to reinforce isolated sectors. In December 2025, the Defence Ministry inaugurated 125 BRO projects in a single event, including 28 roads, 93 bridges and four other works. Among them was the Shyok Tunnel on the Darbuk-Shyok-Daulat Beg Oldie axis in Ladakh, designed to improve all-weather access towards strategically important areas.

This represents more than infrastructure construction. It represents a change in what infrastructure itself means strategically. A road near the frontier is no longer primarily seen as something an adversary might exploit. It is increasingly viewed as something India itself must possess if it intends to respond quickly to a crisis.

The Contrast Is More Important Than the Personalities

The value of revisiting statements made during earlier policy debates is not to mock those who made them. Both the digital-payment concerns and the older border-infrastructure doctrine arose from actual limitations India faced at the time.

The more consequential lesson is that reality can change. An assessment may accurately describe the present while becoming a poor guide to the future if it assumes that infrastructure, technology and institutions will remain unchanged.

There is therefore an important distinction between saying that India cannot do something today and saying that India cannot build the capacity to do it tomorrow. The first may be an accurate observation, while the second requires much stronger evidence.

Defence Manufacturing Reflects the Same Transition

The same principle can be seen in defence production. For decades, India relied heavily on foreign suppliers for combat aircraft, propulsion systems, sensors, artillery, missiles and numerous specialised components. Imports often represented the fastest way to meet urgent military requirements, and imported technologies will continue to remain necessary in several categories.

The larger policy question is whether today’s import requirement should automatically become tomorrow’s import requirement as well. Recent defence-industrial policy has increasingly treated dependence as something that can be reduced through domestic procurement preferences, research and development, private-sector participation, startup programmes, technology partnerships and sustained demand for indigenous systems.

India’s defence production increased from ₹46,429 crore in FY2014-15 to ₹1.78 lakh crore in FY2025-26. Defence exports increased from ₹686 crore in FY2013-14 to ₹38,424 crore in FY2025-26, with Indian products reaching more than 80 countries.

These numbers do not mean India has achieved complete defence self-sufficiency. Important dependencies remain, particularly in aircraft engines, advanced materials, specialised sensors and other high-technology areas. The significance lies instead in the change in policy direction, where dependence increasingly becomes a problem to engineer around rather than a condition simply to accommodate.

From a Workforce Economy to an Entrepreneurship Economy

For much of India’s previous Govt’s growth story, the country’s strength was expressed largely through its workforce. Indian engineers built software for global companies, professionals staffed multinational technology centres, factories supplied labour-intensive manufacturing and millions of workers powered domestic and international services. This created employment, exports and a formidable skills base, particularly in information technology. What it did not automatically create was an equally large ecosystem in which Indians themselves owned the companies, patents, products and technologies at the frontier of innovation.

A significant change after 2016 was the attempt to move beyond that model by encouraging Indians not only to become skilled employees, but also founders and job creators. Startup India expanded from recognition and regulatory simplification into seed funding, venture support, credit guarantees, incubators and procurement opportunities. By March 2026, more than 2.23 lakh startups had been recognised, together reporting more than 23.36 lakh direct jobs. The policy focus has also moved increasingly towards deep technology, with a dedicated Deep Tech Startup category and the ₹1 lakh crore Research, Development and Innovation Scheme supporting high-risk fields such as quantum computing, robotics, artificial intelligence, biotechnology, space and advanced energy technologies.

Defence provides one of the clearest examples of this change. Through iDEX and the newer ADITI programme, startups and MSMEs are now being invited to solve military technology challenges that were once largely confined to government laboratories and major defence companies. By March 2026, 676 startups, MSMEs and innovators had entered the iDEX ecosystem, while dozens of prototypes had moved towards procurement. The objective is no longer simply to purchase technology, but to create Indian companies capable of designing and owning strategic technologies.

The same shift is visible in space and semiconductors. India’s private space ecosystem has grown to more than 400 startups by 2026, with companies developing launch vehicles, propulsion systems, satellites and space services. In semiconductors, more than 100 Indian startups were developing chips by mid-2026, while policy support has expanded across design, equipment, materials and manufacturing. The underlying ambition is clear: Indian engineers should not only design and build for companies headquartered elsewhere, but increasingly create intellectual property and technology companies of their own.

This is especially important in deep technology because such companies require patience. A rocket engine, military radar, semiconductor, quantum system or biotechnology platform may take years of research, specialised laboratories, testing and capital before reaching commercial scale. Supporting such companies therefore demands a different policy mindset from supporting ordinary consumer startups.

The deeper objective is not simply to create more startups, but to create Indian companies that own difficult technologies. That represents another form of capability-building. India’s technical talent has long been recognised around the world; the next step is to create the conditions in which that talent increasingly builds companies, owns intellectual property and competes globally from India itself.

Building Capability Is Different From Buying Equipment

A domestic capability cannot usually be created by placing a single order. An indigenous aircraft requires aerodynamics expertise, metallurgy, avionics, software, testing facilities, manufacturing tooling and hundreds of suppliers. A missile programme requires propulsion, seekers, guidance systems, materials and test infrastructure.

The same is true in civilian technology. Semiconductor manufacturing requires fabrication equipment, chemicals, gases, design tools, packaging facilities, testing capabilities and skilled manpower.

Building an ecosystem is therefore slower and more difficult than purchasing a finished product. The outcomes, however, are also fundamentally different. An imported system solves one immediate requirement, while a domestic capability creates engineering knowledge and industrial infrastructure that can solve future requirements as well.

Semiconductors Present the Same Choice

India’s semiconductor programme offers another contemporary example. For decades, India possessed considerable chip-design expertise while remaining heavily dependent on overseas manufacturing. The absence of fabrication and advanced packaging could have been regarded simply as an economic reality created by the enormous cost and technological complexity of semiconductor production.

Instead, India has begun attempting to build the missing industrial layers. In July 2026, the Union Cabinet approved Semicon 2.0 with an outlay of ₹1,27,500 crore, extending support beyond fabrication into equipment, materials, chip design and other parts of the semiconductor ecosystem.

Whether India eventually becomes a major semiconductor manufacturing centre will depend on execution over many years. What matters for the present argument is the philosophy behind the attempt. The absence of a capability is being treated as the starting point for building it rather than the final argument against trying.

Space Demonstrates What Long-Term Capability Building Can Produce

India’s space programme provides an even longer example of the same principle. Launch vehicles, cryogenic propulsion, interplanetary missions, navigation satellites and docking technologies were not capabilities India inherited fully developed. They emerged through decades of institutional investment, engineering experimentation and repeated failures followed by improvement.

Technologies that once appeared beyond the reach of a developing economy eventually became indigenous competencies. The lesson is not that every technological ambition will succeed, but that today’s absence of capability is not sufficient evidence that tomorrow’s capability is impossible.

Prediction and Creation Are Different Functions of Government

Governments necessarily make predictions. They forecast consumer behaviour, economic growth, technology adoption and industrial demand because public resources are limited and choices must be made.

Transformative policy, however, requires something more than forecasting. A forecast asks what is likely to happen if existing conditions continue, while capability-building asks whether those conditions themselves can be changed.

A policymaker examining low digital adoption in 2016 could correctly observe that millions of people lacked the infrastructure required for electronic payments. Another policymaker could examine precisely the same evidence and conclude that the infrastructure therefore had to be built. Both begin with the same facts, but they arrive at different policy questions.

Infrastructure Changes Behaviour

People do not change behaviour simply because governments announce that they should. Behaviour changes when infrastructure alters convenience.

Digital payments spread because accepting a QR-code payment eventually became easier and cheaper than operating conventional card infrastructure. Bank accounts became more useful when benefits, payments and other financial services could flow through them.

Border infrastructure follows the same logic in a completely different domain. Military commanders gain operational choices when roads, bridges and tunnels make movement possible throughout the year. Industrial policy works similarly because companies invest when infrastructure, demand, finance and supplier networks reduce the risk of building new capabilities.

Infrastructure therefore does not merely serve existing behaviour. It can create entirely new possibilities.

Scale Can Become an Advantage

India’s population and geography are frequently described as developmental challenges because providing infrastructure across such a large and diverse country is extraordinarily difficult. Yet scale can change character once the underlying systems become capable of supporting it.

A digital platform serving hundreds of millions of Indians must function across languages, income levels, geographies and varying degrees of technical literacy. If it succeeds, the same complexity that initially made the problem difficult can produce a system capable of operating at extraordinary scale.

UPI demonstrates this principle particularly clearly. A payment architecture forced to work within India’s scale and diversity eventually became relevant internationally precisely because it had solved difficult problems of interoperability and mass adoption.

Ambition Alone Is Not Enough

None of this means that ambitious policy should automatically be regarded as successful policy. Large programmes can fail, infrastructure can be poorly designed, industrial protection can produce inefficiency, and technology programmes can consume enormous public resources without creating competitive capability.

Transformation therefore requires more than vision. It requires technical competence, institutional continuity, measurable milestones, financial discipline and the willingness to change course when programmes do not work.

The meaningful distinction is not between caution and ambition. It is between policy that accepts every current constraint as fixed and policy that asks which constraints can realistically be removed through sustained execution.

A Country Is Not a Static Dataset

Perhaps the broader lesson is that a nation cannot be understood solely through a snapshot of its present conditions. Statistics describe what exists, but they do not necessarily establish what can exist.

If millions lack bank accounts, banking access can be expanded. If villages lack connectivity, networks can be constructed. If mountain frontiers lack roads, roads and tunnels can be engineered through difficult terrain. If military equipment is imported, domestic production capability can be developed over time. If semiconductor manufacturing is absent, infrastructure and supply chains can be assembled around the objective of creating it.

None of these outcomes is automatic. All require investment, institutional capacity and execution. Current absence, however, is not the same thing as permanent impossibility.

Governing for the India That Can Be

The difference between managing a country and transforming one often begins with the question policymakers choose to ask. One approach asks what India can realistically achieve with the capabilities it possesses today. The other asks what capabilities must be built so that India can achieve tomorrow what it cannot achieve today.

A serious state must ask both questions because present realities cannot be ignored, ambition cannot replace administration, resources are finite and strategic mistakes can be expensive. Countries change, however, when limitations are treated as engineering, institutional and infrastructural challenges rather than permanent definitions of national capability.

Under Prime Minister Narendra Modi, this capability-building approach has become visible across several major policy areas. India’s experience with digital payments demonstrates that infrastructure can alter behaviour on a national scale, while the changing approach to the China frontier shows that infrastructure can also alter strategic options. Defence manufacturing, semiconductor development, space expansion and deep-tech entrepreneurship reflect the same broader effort to build capacities that did not previously exist at sufficient scale.

UPI did not succeed because India was already perfectly prepared for universal digital payments. Border connectivity did not improve because the Himalayas became easier to traverse, and defence production did not expand because the industrial ecosystem was already complete. In each case, capabilities had to be created through sustained investment, institutional effort, regulatory change and policy execution.

The same philosophy is increasingly visible in the effort to move Indian talent beyond the role of a skilled workforce and towards becoming founders, technology owners and builders of globally competitive companies. The emphasis on startups, defence innovation, private space companies, semiconductor design and deep technology reflects an attempt to create an economy in which Indian engineers and scientists do not merely contribute to technologies developed elsewhere, but increasingly build and own those technologies from India.

That may ultimately be one of the most consequential distinctions in public policy: the difference between governing around the limitations of the India that exists and deliberately building the capabilities of the India that can exist.

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References

Rajya Sabha — Official Debate, Discussion on India-China Border and Defence Preparedness, 6 September 2013
https://cms.rajyasabha.nic.in/UploadedFiles/Debates/OfficialDebatesDatewise/Floor/229/F06.09.2013.pdf

Ministry of Defence / PIB — Infrastructure in Border Area, 10 February 2014
https://www.pib.gov.in/newsite/PrintRelease.aspx?relid=103298

Ministry of Defence / PIB — Military Infrastructure on Border, 5 September 2011
https://www.pib.gov.in/newsite/PrintRelease.aspx?relid=75570

Ministry of Defence / PIB — Construction of All-Weather Roads in Border Areas, 25 July 2022
https://www.pib.gov.in/PressReleasePage.aspx?PRID=1844615

Press Information Bureau — Border Roads Organisation: Connecting Places, Connecting People, 19 January 2026
https://www.pib.gov.in/PressReleasePage.aspx?PRID=2215957

Ministry of Defence / PIB — 125 Border Infrastructure Projects Dedicated to the Nation, 7 December 2025
https://www.pib.gov.in/PressReleasePage.aspx?PRID=2199999

P. Chidambaram — Remarks on Cashless Economy, December 2016
Contemporary reporting by India Today and other national publications.

Press Information Bureau — A Decade of UPI: Transforming India’s Digital Payment Landscape, August 2026
https://www.pib.gov.in/PressReleasePage.aspx?PRID=2302657

Ministry of Finance / PIB — PM Jan Dhan Yojana, August 2026
https://www.pib.gov.in/PressReleseDetailm.aspx?PRID=2303643

Ministry of Electronics and Information Technology / PIB — Digital Infrastructure and BharatNet, August 2026
https://www.pib.gov.in/PressReleasePage.aspx?PRID=2295635

Ministry of Defence / PIB — Defence Production Reaches Record ₹1.78 Lakh Crore in FY2025-26
https://www.pib.gov.in/PressReleasePage.aspx?PRID=2273824

Ministry of Defence / PIB — Defence Exports Reach Record ₹38,424 Crore in FY2025-26
https://www.pib.gov.in/PressReleasePage.aspx?PRID=2248124

Ministry of Electronics and Information Technology / PIB — Semicon 2.0, July 2026
https://www.pib.gov.in/PressReleasePage.aspx?PRID=2284796

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