IMF Working Paper, A New Wave of Industrial Policy in Asia-Pacific: Could Resurgence Lead to Structural Transformation? examines the resurgence of industrial policy across 31 Asia-Pacific economies over the past fifteen years. The study links this expansion to geoeconomic fragmentation, supply-chain restructuring, climate transitions, and technological competition, finding that fiscal subsidies and trade restrictions have emerged as the dominant instruments of modern industrial intervention.
The paper also observes a growing tendency among governments to deploy multiple overlapping industrial-policy tools on the same product lines, raising risks of administrative complexity, policy duplication, and conflicting economic incentives.
Productivity Effects and the Three-Year Pattern
Using firm-level data from the ORBIS database, the study evaluates whether industrial interventions generated durable productivity and export gains. The empirical analysis finds that industrial-policy interventions are often concentrated in lower-productivity sectors, and that median firm productivity frequently weakens following intervention.
While targeted subsidies may generate temporary improvements in export performance, the paper finds that these gains commonly fade within roughly three years. Import-restrictive measures such as tariffs and related barriers, meanwhile, show limited durable association with long-term structural transformation.
India in the Firm-Level Evidence
India is explicitly incorporated within the paper’s large emerging market analysis and firm-level database. The study uses Indian ORBIS data and conducts separate robustness checks involving India to prevent large economies from disproportionately influencing regional results.
According to the paper’s empirical findings, the Indian evidence broadly mirrors wider regional trends: fragmented or overlapping interventions may coincide with short-lived competitiveness gains but weaker long-term productivity outcomes. To interpret industrial-policy strategies across the region, the study classifies interventions into three broad approaches:
Safe Bets — supporting sectors close to existing productive capabilities
Moonshots — targeting technologically advanced sectors beyond current comparative advantage
Market-Failure Approaches — addressing sectors central to domestic production networks and coordination gaps
Policy Lessons Emerging from the Study for India
Drawing on firm-level and cross-country evidence, the Working Paper identifies several institutional and policy considerations relevant to industrial strategy:
Ground Interventions in Clearly Identified Market Failures: The study argues that industrial incentives are more likely to generate durable gains when targeted at sectors facing identifiable coordination failures or strategic production bottlenecks, rather than through overlapping or broadly dispersed support measures.
Pair Sectoral Incentives With Stronger Institutions: According to the paper, industrial policy outcomes depend heavily on institutional quality and implementation capacity, suggesting that governance effectiveness remains central to long-term success.
Complement Subsidies With Horizontal Reforms: The authors caution against treating targeted incentives as substitutes for wider structural reforms. Improvements in logistics, regulatory systems, labor markets, and business conditions remain essential to sustaining productivity growth.
Build Continuous Monitoring and Evaluation Systems: The study highlights the importance of periodic, independent assessment of industrial interventions to detect productivity losses, policy duplication, or inefficient resource allocation early.
Exercise Fiscal Discipline and Policy Coordination: Because subsidy-led export gains may weaken over time, the paper argues that industrial interventions should be designed with careful fiscal oversight and coordinated implementation to avoid long-term distortions.
What is a "Structural Transformation"?
Structural transformation is the macroeconomic process by which an economy permanently reallocates its productive factors—primarily labor, capital, and land—away from low-productivity, traditional activities (such as subsistence agriculture) toward high-productivity, technologically complex modern sectors (such as advanced manufacturing, deep-tech infrastructure, and high-value digital services). Rather than simply increasing the output of existing goods, a successful structural transformation shifts the entire composition of national GDP. It drives an economy up the global value chain by fostering product complexity, expanding domestic production networks, and generating sustained, aggregate productivity growth that insulates the nation from external commodity shocks.
Follow the Full Update Here: IMF Working Paper: A New Wave of Industrial Policy in Asia-Pacific (WP/2026/101)