Strike the economy’s head pin: Recall Say’s Law? Let supply drive India’s growth, don’t wait for demand

In ten-pin bowling, a strike happens only when the head pin is hit. Economic strategy is no different. If India wants to trigger a virtuous cycle of 8% growth, it must hit the right first pin. While demand matters, it is not the head pin. Supply-side expansion is that head pin.

As I argue in India@100, India has the potential to grow at an average of 8% in real terms for the next two decades. But only if we diagnose the constraints correctly.

Policy conversations habitually default to stimulating domestic demand. Similarly, India Inc often wrings its hands over demand. But India’s medium- and long-term bottlenecks are overwhelmingly on the supply side. Countries that sustained 8% plus growth for a decade, such as Japan, South Korea and China, did not wait for domestic demand to mature. They expanded supply first. Demand followed, and explosively at that.

The ubiquitous smartphone, internet and now artificial intelligence (AI) are all supply-side marvels; we did not even know such products or services were possible, let alone demand them.

India’s own experience tells the same story. Consider information technology (IT) and IT-enabled services.

The surge of the 1990s did not originate in domestic demand. Trailblazers such as TCS, Infosys and Wipro built world-class delivery capabilities for global clients. Instead of waiting for better infrastructure or higher local demand, they invested in modern campuses, large-scale training and deep partnerships with academia. High-quality jobs followed. Rising incomes then fuelled demand across sectors. Supply led. Demand followed.

Telecom offers an even starker illustration. In the 1980s, obtaining a landline could take years. Charges were steep, the service unreliable. Reforms changed the equation by expanding supply. In the late 2010s, Reliance Jio accelerated this shift with a massive infrastructure rollout, sharply lowering data prices and offering free voice calls.

Affordable internet access for rural and urban India alike turned the country into an integrated online marketplace. Demand did not precede this transformation. It was unleashed by supply.

Aviation tells a similar story. In the early 1990s, a round-trip from Kolkata to Mumbai cost around ₹20,000, or over ₹1.5 lakh in today’s terms. Flying was a luxury. Today, the same journey costs a tenth of that. As routes expanded, competition intensified and scale improved efficiency, the Indian middle class took to the skies. Again, supply expansion triggered demand creation.

The lesson extends well beyond these three sectors. Solar developers built large parks and used competitive auctions to drive tariffs down from double digits to among the world’s lowest; only then did adoption accelerate. Likewise, UPI created frictionless digital rails first; consumers and kirana stores embraced them at scale thereafter.

Pharma companies invested in US-FDA compliant manufacturing long before domestic purchasing power justified it, earning India the label ‘pharmacy of the world.’

Expressways and freight corridors cut logistics time, integrated markets across the country and enabled firms to serve customers they previously could not reach.

Smartphone manufacturing scaled under production-linked incentives, deepening ecosystems and lower device costs, which in turn expanded penetration.

In sector after sector, economic inflection points came once entrepreneurs and policymakers shifted the supply curve outward. Demand then responded—often explosively.

That is the central lesson that Indian policymakers and corporate boardrooms must internalize. Hit the right first pin—supply expansion—and demand will fall in sequence. Don’t put the cart before the horse by waiting for demand to show up before building supply capacity.

But here lies a paradox. Every firm waits for someone else to invest, and so no one invests. This is the classic free-rider problem and it appears endemic to private investment in India.

This is precisely where industry bodies such as CII and Ficci must elevate their role. Their unique convening power puts them in a position to break the free-rider trap. By fostering coordinated investment commitments, sharing market intelligence that reduces uncertainty and creating platforms where firms move together rather than wait alone, they can catalyse the collective risk-taking that India’s supply-side expansion demands. This is not a peripheral function. It is a national cause.

For its part, the government can catalyse this shift. Streamlined regulatory approvals and transparent, time-bound clearances can accelerate execution. For this purpose, each ministry in the government must have a standing committee that comprises industry leaders and reports directly to the minister, not to (or through) the ministry’s secretary. The Securities and Exchange Board of India has this practice and it works very well.

India has the necessary fundamentals. But unlocking sustained 8% growth requires a decisive shift in mindset: from demand-first thinking to supply-led strategy.

The pins are all lined up. It is time to strike the head pin.

The author is professor of finance, Indian School of Business, former chief economic advisor, Government of India, and former executive director, International Monetary Fund.