Observations on India’s external exposure in the age of capital wars

There are two important trends that are likely to impact cross-border capital flows for the foreseeable future. The first is the already high and increasing public debt burdens and persistently high budget deficits across the developed world. The second is the growing efforts to reshore manufacturing and reduce the dependency on China. The US is at the forefront of both these trends. 

Both are having large and growing spillovers across the global financial markets, especially adversely impacting developing countries. The first trend is raising sovereign bond yields, forcing interest rate hikes, and weakening currencies. The second trend is triggering a rising competition to attract manufacturing investment and retain domestic savings. 

I blogged here arguing that these trends will intensify the competition for capital, and most likely trigger capital wars. I had also discussed the possible implications for India. 

These trends come at a time when India is continuing the opening up of its financial markets and actively courting foreign investment. What do these trends mean for the RBI’s monetary policy, the rupee, India’s foreign direct investment, foreign portfolio investment, external commercial borrowings, and bilateral and multilateral aid flows? 

Finance 101 and historical experience tells us that rising US Treasury yields trigger capital flow reversals, puts pressure on the rupee, worsens the trade deficit, and reduces RBI’s monetary policy autonomy. And there is a self-reinforcing spiral associated with this cycle. On top come the squeeze on FDI inflows arising from the efforts to retain domestic savings and reshore manufacturing. 

Globally, the rising stock and flows of public debt portend a long period of higher interest rates, also because of the inflationary pressures that are already on play and will remain so for the foreseeable future. 

In this backdrop, this post will use data analysed with Claude to examine the consequences of India’s external exposure. 

Arguably the biggest deterrent to foreign capital inflows into India today is the weakening trend of the rupee. A weaker rupee raises the hurdle rate that any investor, FDI or FPI, would demand for investing in India. The rupee depreciation, therefore, functions as a direct tax on foreign investors' dollar-denominated returns. Every 1% of depreciation eats roughly 1% of the foreign investor's return. 

As an illustration, the rupee has weakened from ₹74/$ in 2021 to ₹96/$ in 2026, a cumulative decline of 30% over five years. This means that any foreign investors who remained invested in India should have earned an additional 30% returns to offset the depreciating currency. 

So what drives rupee depreciation? 

The obvious candidates are inflation differential, US Federal Funds rate, current account deficit, and oil prices. While a contemporaneous model OLS regression of annual rupee depreciation on these four structural drivers barely fits, a one year lagged model fits well (R-sq = 0.62, F-stat p = 0.001). The rupee depreciation correlates primarily with oil prices (the import-bill channel), the inflation differential (mediated by the RBI’s response), and the current-account balance, but with a one-year lag. 

Going by this, given the prevailing global market conditions and with no signs of an end to the Iran war, the rupee is primed for further declines in the year ahead.

The prospects of further rupee weakening is reflected in the USD/INR forward premium, which compressed dramatically from ~5% in early 2021 to barely 1% by mid-2024 as Fed hikes narrowed the India-US rate gap, but has since been rising and is about 3.5-4.1% in October 2026. For ECB borrowers, the forward premium is the hedging cost.

What does all this mean for RBI’s monetary policy choices? 

The Uncovered Interest Parity (UIP), which is an unobserved theoretical construct, states that the difference in interest rates between two countries should equal the expected change in exchange rates between their currencies, so that there is no arbitrage opportunity. The reality though is complicated by risk premiums and transaction frictions. 

The higher-for-longer global interest rates narrow the monetary policy space to cut or even maintain neutral stance in India without triggering outflows and rupee depreciation. In an open-economy framework where India’s capital account is substantially open on the debt side, the UIP floor on the repo rate rises mechanically. And, as the graphic below shows, it has been rising since 2021. With the Fed at 4.25% and the BoJ no longer anchored at zero, the UIP floor on the repo rate is around 6.3%.

This has created a situation where the UIP floor today is above the RBI’s repo rate. This puts pressure on the rupee to depreciate, something backstopped only the RBI’s large reserves. In fact, the RBI’s 5.5% repo rate works today only because of the forex-reserve buffer. 

However, now with US looking at the beginning of a rate hike cycle, the RBI’s room for monetary policy autonomy is considerably squeezed. It has little choice but to respond with raising rates. 

The capital wars channel compounds the problem. A big risk is the US net Treasury issuance estimate of $2tn/yr through 2028. It will be a major sink for global savings, and will raise the hurdle rate for all EM sovereign and corporate issuance.

An associated signature of this squeeze is the narrowing of the spread between Indian and US 10 year sovereign bonds. It has more than halved since the beginning of 2021. Coupled with the currency hedging cost, the spread disappears, thereby eliminating any incentive among those pursuing carry trade opportunities. 

What does this imply for India’s external debt exposures? 

In the aggregate, India’s external debt looks moderate at 20.8% of GDP. But there are two dimensions that need monitoring. The first is that the historical access to cheap, long-tenor, concessional fixed rate debt, primarily from bilateral and multilateral institutions, has now given way to floating rate loans benchmarked to SOFR/TONA/TORF (the transition from LIBOR happened by 2023). Of the $174.3 bn sovereign debt exposure (as of June 2026), 58% are now floating rate loans. More on this latter.

The second is the composition of external debt is now shifting away from the government to the private sector. This composition deserves closer monitoring given the rising share of External Commercial Borrowings (ECBs). 

At 32.8% of India’s external debt, ECBs are now bigger than the combined value of multilateral and bilateral loans and NRI deposits. The downward pressure on the rupee is a major risk for ECBs. This risk is amplified by the rising rates globally since most ECBs are floating-rate (SOFR-linked).

Of the $255bn outstanding ECBs, only 66% are hedged, and the remaining are direct, uninsured pass-through. The 34% unhedged slice ($87bn) is where the first stress will surface. It will fall most likely at NBFCs, airlines and renewable-energy developers that borrowed at low SOFR in 2021–22 and now must roll.

The impact of rupee depreciation on the $87 bn of unhedged ECBs is significant. 

These risks are also serious also because of the shorter repayment schedules of the ECBs. About $120 bn are due for repayment till March 2028. 

Another cause for concern may be the nature of ECB borrowers. An Indian corporate borrowing via ECB faces three cost layers - the base rate, currency depreciation, and the cost of hedging. The chart below shows that at least since 2023, ECBs should have been losing their attractiveness, especially for the higher rated borrowers. Nevertheless the ECBs have continued to rise, though issuance has fallen 33% in FY26. This raises a concern that some proportion of the ECB borrowers may be coming from the riskier market segments. 

The rising ECB exposure necessitates greater RBI oversight and microprudential regulation. For example, it should mandate higher ECB hedging ratios for sectors where revenues are in rupees (airlines, renewables, NBFCs). It should keep a close watch on higher cost commercial borrowings by by systemically important corporates.

The impact of rising interest rates globally is also showing up on India’s bilateral and multilateral borrowing windows. The notion that multilateral and bilateral lending is cheap, long-tenor and insulated from financial-market cycles is no longer true. ADB, World Bank and JICA have all transitioned from LIBOR to the new overnight benchmarks — USD SOFR, Yen TONA and the newer TORF. Each is 300–350 bps above its 2020 floor.

For four decades, yen funding has been India’s cheapest formal external finance. JICA has been the backbone of financing for Delhi Metro, Mumbai Trans Harbour Link, Delhi Mumbai Industrial Corridor (DMIC), Western Dedicated Freight Corridor (DFC) and the Mumbai-Ahmedabad bullet train. All of them were conceived when the all-in yen cost was below 1%. But BoJ’s rate hikes, at 1.25% in Sep 2026, has already taken interest rates to their highest since 1995, and much more is expected as Japan normalises its financial markets. India has roughly $50bn of yen-denominated external debt (6.4% of total). 

Each 100 bps of additional yen funding cost on a 30-year ¥1 trillion exposure is roughly ¥100bn in extra lifetime interest. This shifts the IRR calculus materially.

A JICA yen loan signed today has an all-in cost of about1.3–1.4%, still the cheapest money India can get, but roughly double the 0.6–0.8% that typical JICA loans carried in 2015–2022. More consequentially, as new BoJ hikes feed through, the TORF benchmark will keep rising. 

Put simply, India’s historical reliance on JICA for metro rail, DMIC, and large infrastructure is predicated on a yen funding cost that is quietly disappearing. This is not a cyclical shift, but structural one.

For the government, and including state governments, there is a need for a serious revisit of the external aided project (EAP) financing windows. Does it make fiscal sense to continue the same levels of such borrowings given the rate risks? 

Beyond the direct interest cost, higher global rates reset India’s external exposure through three further channels. They are the foreign portfolio flows into Indian debt markets, the yield that must be offered on NRI deposits to retain the stock, and the capital-wars channel through which US issuance crowds out EM access.

Finally, as we wrote in The Rise of Finance, thanks to the unavoidable spillovers from the dominance of the US economy and the dollar, the space available for developing countries to pursue autonomous monetary policy was already constrained. This is set to shrink further on the face of the trends discussed above. 

Weekend reading links

1. Thanks to inflation global debt burdens have been declining, falling by 27 percentage points between early 2021 and end of 2023. 

2. Rent controls may do more harm than good, except in controlled apartments.

And Spain is a good illustration that immigration is adversely impacting the housing market.

3. Excellent article on ASML, 42-year old, Veldhoven-based, Dutch maker of the $400 million extreme ultraviolet (EUV) lithography machines. 

The size of a double-decker bus, the machine prints circuits on to silicon wafers by firing light generated from 60,000 droplets of molten tin per second at them, using mirrors, lasers and short-wave light in a kind of vacuum-sealed nano-photocopier... ASML’s supply chain is something else. Where a typical industrial product might have a few dozen suppliers, an ASML EUV has more than 100,000 parts provided by 200 principal suppliers and 2,000 companies overall... Rather than trying to make everything itself, ASML outsources to the best manufacturer of each component — Zeiss for optics, Trumpf for lasers, VDL for mechatronics.

4. BigTech AI borrowings have fragmented the US debt market into two parts - AI-borrowing and the rest - and there is a growing risk that the cost of capital for everyone will rise as AI borrowings rise.

The scale of the borrowing will have its impact in squeezing out the rest of the economy and raising cost of capital for everyone. And it is going global.

In June, Amazon sold C$14bn ($10bn) of debt, smashing the Canadian currency’s previous record of C$8.5bn set by Alphabet just a few weeks earlier... Last month Alphabet issued a record A$5.5bn ($3.9bn) bond in Australia, more than twice as large as the previous biggest. The group also holds the record for the largest Swiss franc bond issue, having raised SFr3.1bn ($3.7bn) there in February. Amazon’s SFr2.8bn offering in May is the second-largest... Alphabet sold £5.5bn worth of sterling bonds in February, part of a $31.5bn package that included a rare 100-year £1bn bond that some say rekindled interest in long-maturity sterling debt. Amazon also raised £4.25bn earlier this month, its first-ever sterling issue.

What complicates matters is that the surge in AI borrowings come precisely at a time when government borrowings are also rising and are competing with each other, putting pressure on bond yields. 

5. India equity market facts of the week.

Both the Nifty and the Sensex... have ended in the red for eight straight weeks, their longest losing streak in 25 years. In the first nine months of 2026, foreign portfolio investors (FPIs) have pulled out at least ₹3 trillion from Indian equities, surpassing all annual outflow records.

6. Excellent chronicle by MS Sahoo of the emergence of India's regulatory architecture since 1991.

7. African credit ratings fact of the week.

Of an estimated $4tn regional capital base, less than a quarter is covered by credit ratings, according to the African Union. At the end of 2025, it said, the continent had fewer than 4,000 ratings, compared with 823,000 in the EU and more than 2mn in the US.

8. John Mearsheimer describes the Iran war the "mother of all strategic blunders".

Iran is number one in my opinion, because 1) we went into that war based on the false claim that Iran was on the verge of acquiring a nuclear weapon; 2) we had a theory of victory — air power alone would produce regime change — that has never worked and was not going to work this time; 3) we had no contingency plan for dealing with the likelihood that Iran would close the Strait of Hormuz; 4) we failed to achieve any of our four principal objectives — regime change, ending Iran’s nuclear enrichment capability, ending Iran’s long-range missile capability, and ending Iran’s support for Hamas, Hezbollah, and the Houthis; 5) the Strait was closed, which has already done significant damage to the international economy and could do much more — remember President Trump worries about following in Herbert Hoover’s footsteps; 6) we seriously undermined our carefully crafted alliance structure in the Gulf; 7) virtually all of our bases in the region have either been badly damaged or destroyed, to the point where we have moved most of our military assets out of the Gulf region and will probably not be able to return; 8) we have run down our stocks of key weapons to the point where we have weakened our deterrent postures in East Asia, Europe, and even the Western Hemisphere; 9) we have done enormous damage to our reputation as a reliable and wise ally; 10) we have markedly improved Iran’s strategic position in the Gulf region; and 11) there does not appear to be much chance — perhaps no chance — that we will get a nuclear deal of any sort with Iran, which was once considered of the utmost importance. In fact, there is a reasonable chance Iran will acquire nuclear weapons. President Trump has certainly given Iranian leaders — and other leaders of non-nuclear states around the world — a powerful incentive to acquire a nuclear deterrent.

9. Martin Wolf points to why the Iran war did not disrupt the oil markets and world economy as much as expected, with real oil prices still only around the long-term average. 

Johannes Urpelainen of the Johns Hopkins School of Advanced International Studies notes that: “First, the energy transition has reduced the global economy’s dependence on oil. Second, supply chains have proven resilient and adaptive. Third, producers outside the Middle East have acted fast to produce more oil and natural gas. Finally, drawdowns of global oil inventories have filled the remaining gap.” Flexibility is notably true of the Gulf. As former diplomat Mohammed Elsoukkary writes: “by the end of September preliminary estimates placed regional crude exports at approximately 16.3 million barrels per day, compared with 19.5 million in February, including roughly 9.7 million moving through Hormuz.”

Interestingly, the world entered the War with record inventories, accumulated especially in 2025.

10. French bond yields are higher than Italy's.

Not only does it now cost France more to borrow than it does Italy and Greece; a rising number of big French companies enjoy lower market interest rates than does the French state. Of all the G7 nations, it has suffered most from the debt sell-off triggered by the Iran war... France’s debt has reached €3.5tn, at nearly 120 per cent of GDP, far above the Eurozone average. Servicing costs have climbed fast to become the state’s single biggest expenditure ahead of education or defence. In just a month the additional interest rate that France pays to borrow over ultra-safe German debt — a key barometer of investor concern — has surged by almost two-thirds to around 1.4 percentage points on 10-year debt, heading towards the heights charted during the Eurozone debt crisis... A series of ratings downgrades has helped push up the country’s borrowing costs, which passed Greece’s in late 2024 and Italy’s last year. Investors now label France the “new periphery”... Despite the government’s tax-raising powers, its borrowing costs now exceed those of big French multinationals such as LVMH, the luxury group, and Sanofi, the pharmaceutical company. According to Goldman Sachs, more than a quarter of investment-grade French companies had a lower yield on their bonds than comparable government debt as of the end of September...

Increasing taxes to deal with the rising cost of debt servicing could also be perilous. At 44 per cent of GDP, the tax burden is already among the world’s highest; the average in the OECD club of rich countries is 34 per cent. Almost a quarter of public spending is gobbled up by pensions. French retirees leave the workforce earlier and receive relatively generous benefits by OECD standards. Attempts to push back the retirement age trigger angry protests.

11. US Treasury bonds are now threatening to hit 6% for the first time since the turn of the millennium. 

Borrowing costs for companies with the lowest credit ratings hit their highest level since May 2020 this month at 17 per cent, driven by the rise in Treasury yields to multiyear highs and by investors demanding more compensation for lending to such businesses. The risk premium for companies rated triple C or lower has risen to 12 percentage points, the biggest since 2022. Analysts said companies with floating-rate loans, and those needing to refinance debt in the coming months, were most at risk from the government bond sell-off, which last week pushed the yield on the 10-year Treasury note to its highest since 2002... But a further rise in Treasury yields could lead to broader pain across credit markets, analysts say. When it comes time to refinance existing debt, higher rates risk jarring the many companies that took on debt when interest rates were at rock-bottom levels in the early 2020s. Moody’s estimated last year that a record $1.45tn of US investment-grade corporate debt would come due between 2026 and 2030. Rising rates will put pressure on businesses to increase profits at a similar pace to rising borrowing costs.

12.  S&P quarterly earnings growth to remain above 25% for more than three quarters in a row. 

13. Ethnic cleansing in West Bank and East Jerusalem now. 

14. Interesting analysis of Adani Group's acquisitions through the NCLT process.

Since 2018, Adani Group, its linked entities and consortiums have participated in bids to acquire 26** distressed companies through India’s bankruptcy process. It has won 16 of them, with one case ongoing, though the latest decision went in Adani’s favour. This is a 61.5 percent success rate – meaning it won nearly three out of every five bids. While 14 of these 16 acquisitions came through the Corporate Insolvency Resolution Process (CIRP) to revive distressed business, the other two came through liquidation aimed at winding up operations... Across the 16 Adani acquisitions where tribunal orders disclose both admitted claims and recovery, creditors were owed approximately Rs 1.31 lakh crore and recovered only about Rs 33,000 crore – just 25.4 percent of the total. The loss was estimated to be over 97,700 crore, making the haircut around 74.6 percent. That is slightly higher than the national average of 69.4 percent.

Emerging industrial policy opportunity in batteries

It is well known that the convergence of renewable energy and battery storage would have transformational impacts on electricity markets. It overcomes the intermittancy problem that bedevils renewable generation. However, the high battery costs have been a problem. 

But two recent news articles highlight why that may be a thing of the past. One, for the first time, battery storage costs have fallen below thermal. Estimates by think tank Ember suggests that the cost of battery packs used in grid-scale storage systems fell by 45 per cent last year alone.

This trend has been expedited by the geopolitical convulsions of recent times, with the surging demand from data centres and the oil and natural gas supply squeeze due to Iran war turbocharging it. In 2026, 40 per cent more large-scale batteries are estimated to be installed than in 2025. 

Second, this convergence is being reflected in tenders being called in India to procure battery power.

Solar Energy Corporation of India (SECI) ran an auction to buy electricity capacity where they (SECI) demanded the availability of a thermal generator. A bidder who plans to use solar or wind is then forced to load up with the batteries required, to charge in the day, so as to deliver thermal-style availability. This auction discovered a price of ₹5.25 per kWh, guaranteed for 25 years. It is hard to identify a single comparable price for coal thermal in India because coal-extraction rights are given by the state in non-market ways. But if we look at recent new coal-power contracts in India, they are priced at ₹5.38-6.30 a unit. The SECI-discovered thermal-mimicking price for renewable power is now 10 per cent cheaper than that for new coal.

However, this convergence is accompanied by the now common concern about dependency on China.

Chinese producers account for 95 per cent of large-scale storage batteries, says Benchmark Mineral Intelligence. The sector’s rapid growth is strengthening China’s position as the dominant force in low-carbon energy, compounding opportunities for Chinese companies in adjacent markets such as wind and solar generation equipment… The seeds of China’s battery storage boom were sown in the years after Xi Jinping took power in 2012, with his pledge to build an “ecological civilisation”.

An industry in China that emerged from China’s industrial policy efforts to support battery production for EVs is now shifting towards grid storage. 

By 2021, it had become clear to the Chinese state that a vast amount of renewable power was being wasted, with solar and wind plants often generating far more electricity than the grid could absorb. So it launched a strategic push to deploy battery storage on the grid at large scale. Across much of the country, developers were required to build or commission large-scale storage as a condition of approval for new wind and solar plants. Again CATL has been at the forefront of this effort. Its fastest-growing business line today is the production of cells for large-scale energy storage systems. The company accounted for 22 per cent of cell sales for these systems globally in the first half of the year, making it the market leader in China and abroad. As a result of the state’s drive, China’s battery storage capacity expanded from 2.4 gigawatts in 2020 to more than 140GW at the end of last year, according to the Energy Institute, an industry membership body. In the first half of this year, coal’s share of Chinese power generation fell below 50 per cent for the first time ever. Exports of China’s large-scale battery technology have also surged. Researchers at BloombergNEF estimate that new battery storage capacity of 84.6GW will be added outside China this year — 65 per cent higher than last year.

Understandably, the Western governments have been taking action to reduce the dependence on China. 

In August, Trump authorised the energy department to block Chinese-linked battery storage equipment from the US grid on national security grounds. Washington has also revised the rules around tax credits for battery storage, in effect limiting the amount of Chinese equipment American companies can use. Some US officials say that Chinese-made storage equipment could potentially contain chips enabling it to be controlled or switched off remotely. Similar worries have emerged in the EU, where the authorities have moved to restrict public funding for storage projects using certain key components from “high-risk” countries including China… The US crackdown will force a growing reliance on kit made by alternative suppliers such as South Korea’s Samsung SDI and LG Energy Solution, whose storage batteries are significantly more expensive.

Buoyed by the success of the SECI auction in August that secured 1 GW of solar and storage capacity, the Government of India plans to emulate China and drive battery storage.

Chinese-made batteries are now being deployed en masse in the country, which in the first half of this year added seven times as much new power storage as it had in total at the end of 2025, according to energy research company Mercom India. Much of the rise comes from a single huge solar and storage project built by the Adani Group... The government is now planning regulation that would require storage to be installed alongside new solar and wind power plants — similar to the rules that drove China’s storage lift-off. Climate advocates hope this will reduce the country’s heavy reliance on coal, the most carbon-intensive fossil fuel.

However, India’s independent power producers have relied heavily on Chinese manufacturing capabilities to import commoditised thermal BTG equipment in the first decade of the millennium, and solar cells and wind turbines in the second decade. In both cases, the country missed the opportunity to leverage the massive demand to develop indigenous manufacturing capabilities. 

In both industries - thermal and renewables - the biggest multi-sector corporate groups in India, with a great appetite for entering new industries, led the capacity addition. But instead of thinking long-term and seeing manufacturing as a vertical integration opportunity, they preferred the short-term and easy way of importing from China. 

Another opportunity in power sector that is playing out right now is that of smart meters, where too the same corporate groups have been satisfied with importing Chinese meters and making the easy money by being contractors to install and maintain them. 

The massive future demand for batteries presents a fourth opportunity in power sector itself over the last two decades for both the government and the same corporate groups to learn from their mistakes in thermal and solar generation and smart meters. Many large Indian corporate groups are already engaging in the battery energy storage systems (BESS) industry. The Adani group has already started work on the 30GW Khavda renewable energy park, one of the largest in the world. 

These, as I have blogged here, are opportunities for an industrial policy that involves partnering with large domestic corporate groups to catalyse domestic manufacturing. 

Only these groups have the heft to overcome the coordination problems, financing deep pockets, and risk-aversion to be able to manufacture at a scale that’s attractive enough to break away from the vice-like grip of Chinese manufacturers, and shift component manufacturing in India. Even with the most generous industrial policy and the favourable geopolitical tailwinds of diversifying out of China, there are hard limits to how much industrial policy and market dynamics on their own can go in relocating component makers from China… For countries like India, without any large domestic OEM and without the unique circumstances behind Apple’s engagement with China, local corporate groups may be valuable assets to succeed with the objective of deepening and broadening their manufacturing base. 

In this context, there’s always the risk of crony capitalism. Already, there are strong trends of business concentration across sectors in the Indian economy, driven by the large corporate Groups. But this risk should not be an excuse to overlook the large body of evidence from across the world about the value of large domestic corporate groups in national economic growth.

Such engagement by the private corporate group would involve some very logical long-term bets. For one, the Indian market itself presents a great opportunity for huge growth, and therefore a strong case to forge strategic partnerships, acquisitions, technology licensing, and invest in R&D and innovation, to build domestic capabilities in battery manufacturing. Besides, this would be a bet not only on the large Indian market, but also the global market in an emerging technology where there is an acute scarcity of non-Chinese manufacturers. 

Further, for these groups, grid-scale battery business has deep synergies with their existing businesses, thereby providing them important leverage in negotiations on joint ventures, technology licensing, and domestic manufacturing. This is important since Indian corporates have preferred to leverage the scale of their purchases for short-term pricing considerations when negotiating with their suppliers. 

The Indian corporate groups must summon a long-term vision to both grow into an emerging frontier technology, and also invest in capabilities in R&D and innovation that allow movement up the value chain. They would have to formulate 4-7 year strategies for acquiring capabilities in battery chemistry, starting with the current system integration (or assembly) role to moving up the value chain from licensed to proprietary manufacturing. This would be taking a leaf out of what CATL, BYD, and Sungrow have done. 

The government could provide a big boost by coupling battery and renewables in future power purchase agreements, thereby creating an effective advance purchase volume commitment (even if at competitively determined prices). The new version of the Production Linked Incentive (PLI) scheme should embrace the details outlined here (for smart meters) to encourage progressively increasing domestic value addition. It could use diplomacy to support this with securing access to the various chokehold inputs required for the industry. 

But most importantly, a non-negotiable requirement for government support should be mandatory export competition from the outset to ensure that a globally competitive industry emerges in the country. 

As strategy, it may be useful to bring all the fiscal and other support, including the likes of Viability Gap Funding (VGF) financing, under one umbrella so as to ensure efficient administration and ease of access by companies. This is an important enough agenda to merit such a dispensation. Further, the selected industry partners should be made to commit to medium-term action plans that are linked to simple and easily verifiable milestones and outcomes, and they should periodically report on them. All public policy support should be made contingent on realisation of these outcomes.