T. Shailly
The global economic outlook over the past few years has been characterised by deceleration, financial instability, and geopolitical uncertainty. Advanced economies continue to cope with persistent inflation, tighter monetary conditions, and the aftermath of supply chain disruptions triggered by the pandemic and conflict in Europe. In this subdued recovery environment, India has emerged as a critical driver of global economic momentum. Recording a growth rate of 7.8 per cent in the first quarter of 2025, India has solidified its status as the world’s fastest-growing large economy. The significance of this performance becomes clearer through comparative analysis: the United States is growing at approximately 2 per cent, major Eurozone economies are struggling to remain above 1 per cent, and China, the engine of emerging market expansion, is stabilising around 4 to 4.5 per cent. According to the International Monetary Fund (IMF), India will contribute almost 16 per cent of global growth in 2025, demonstrating not only national resilience but also systemic importance.
India’s economic trajectory is underpinned by three core strengths: robust domestic demand, a conducive policymaking environment, and strategic investment in productive capacities. Private consumption constitutes nearly 60 per cent of national output, supported by a youthful and expanding middle class whose aspirations increasingly align with global patterns of modern consumption. This persistent demand base has cushioned India from the sharper downturns visible in export-driven economies exposed to weakened global trade flows.
Infrastructure development has likewise played a decisive role in shaping growth momentum. The Union Budget 2024-25 allocated a record 11 lakh crore rupees to capital expenditure, channelled into transport networks, logistics infrastructure, energy projects, and urban development. These investments not only create employment but also reduce bottlenecks, enhance productivity, and support the emergence of new industrial clusters.
A notable structural shift is visible in the manufacturing sector, encouraged by Production-Linked Incentive (PLI) schemes designed to build domestic supply chain capacity while attracting foreign capital and technology. India’s mobile phone exports, surpassing 15 billion USD in 2023-24, mark a symbolic transformation from import dependency to export competitiveness. The government’s pursuit of semiconductor capacity, coupled with expansion in pharmaceuticals, green technology, and advanced materials, suggests a deliberate rebalancing of the economy toward high-value production. Such shifts conform with the broader national strategy of reducing external vulnerabilities and scaling up contributions to global industrial output.
India’s services sector, particularly digital services, continues to demonstrate unmatched dynamism. With IT and IT-enabled services achieving exports of over 260 billion USD in 2024 and employing more than five million professionals, India remains a cornerstone of global technological operations. The digital ecosystem, rooted in the Jan Dhan-Aadhaar-Mobile trinity, has enabled transformative financial inclusion. Over 50 crore citizens now have access to banking services integrated with secure digital identity and mobile connectivity. The public digital infrastructure has strengthened welfare delivery, expanded credit access, and positioned India as a global reference point for inclusive digital governance.
Performance on human development indicators has advanced alongside economic expansion. The Ayushman Bharat health protection scheme, covering nearly 60 crore citizens, represents the most extensive public healthcare coverage programme in the world. The Har Ghar Jal initiative, which has extended piped water to more than 14 crore rural households, has materially reduced health risks while supporting gender parity by easing domestic labour burdens. Increasing broadband penetration, with the number of internet users crossing 850 million, has significantly bridged urban-rural divides in education, market access, and public service delivery. These shifts highlight a model of growth that increasingly integrates social protection and welfare enhancement.
India’s renewable energy transition underscores its commitment to sustainable modernisation. With installed renewable capacity reaching 190 gigawatts in 2024, India is now the third-largest renewable energy generator globally. Progress in solar and wind projects, electric mobility, and emerging green hydrogen infrastructure reflects a conscious alignment between economic development and environmental responsibility, particularly critical for a nation facing acute climate vulnerabilities.
Regional Comparative Assessment: India’s Relative Security and Stability
The strength of India’s economic fundamentals becomes more pronounced when analysed alongside those of neighbouring South Asian economies. Pakistan, Sri Lanka, and Bangladesh, India’s closest economic comparators, have experienced severe headwinds in recent years, ranging from debt distress to balance-of-payments crises. Pakistan has grappled with high inflation, currency depreciation, and limited fiscal space, resulting in reliance on external bailouts and constrained developmental investment. Sri Lanka’s 2022 sovereign debt crisis has had prolonged consequences, affecting public finance, essential imports, and social stability. Bangladesh, once celebrated for its rapid export-driven growth, has recently faced foreign exchange shortages and industrial vulnerabilities amid a global demand downturn.
In contrast, India’s external and fiscal positions remain comparatively robust. Foreign Direct Investment inflows touching 71 billion USD in FY 2024 demonstrate enduring investor confidence. Foreign exchange reserves remain among the world’s largest, offering a buffer against global financial volatility. Demographic advantages also differentiate India from its neighbours. While Pakistan and Bangladesh face employment stress and governance challenges, India’s demographic dividend, with over 65 per cent of the population below 35 years, emerges alongside a strengthening technological ecosystem and expanding skilled workforce. This places India in a structurally advantageous position for long-term productivity gains.
Moreover, India’s approach to economic governance has provided relative insulation from extreme shocks. Monetary policy has maintained a careful balance between inflation management and growth promotion, while fiscal policy has prioritised public investment rather than indiscriminate consumption-driven stimulus. By avoiding the systemic crises faced elsewhere in the region, India offers a landscape of political and macroeconomic stability that is increasingly vital for sustainable growth.
Challenges and Reform Imperatives
India’s progress, however, is accompanied by systemic challenges requiring sustained attention. Unemployment among educated youth remains a complex concern, signalling a need for accelerated job creation in advanced manufacturing and emerging technology sectors. Regional imbalances continue to influence development outcomes, as states in central and eastern India lag behind their southern and western counterparts. Skilling demands have intensified due to rapid technological change; thus, education systems must evolve to enhance innovation capacities and critical employability skills. Infrastructure expansion, although substantial, will require deeper urban planning reforms to ensure mobility, housing, and sustainability amid growing urbanisation.
These structural challenges do not negate India’s economic strength but instead highlight areas where future policy focus will be essential to sustain long-term momentum.
Strategic Implications for India’s Future Positioning
India’s rise carries broader geopolitical significance. As global supply chains diversify away from concentrated manufacturing networks, India is emerging as a preferred alternative destination due to its scale, stability, and market depth. The country’s energy transition underscores its role in shaping climate-responsible economic development. Its digital governance capabilities have become models for emerging economies seeking low-cost, high-efficiency public systems. With increasing stakes in global economic governance institutions, India’s role in shaping international trade and investment norms is set to strengthen.
India’s growth thus moves beyond national economic performance; it contributes to a redistribution of economic power in the international system. While many large economies face demographic contraction, rising debt, or eroding competitiveness, India’s expanding internal market and increasingly sophisticated industrial base position it as a long-term pillar of global economic stability.
Conclusion
India’s economic ascent in a fractured global environment highlights the significance of resilient domestic demand, strategic investment, and inclusive technological governance. Through advances in manufacturing competitiveness, digital infrastructure, renewable energy, and social protection, India has demonstrated a development trajectory that integrates economic dynamism with equitable progress. A comparative analysis across South Asia underscores India’s relative security, stability, and future-focused economic architecture. Challenges remain particularly in employment generation, skilling, and regional development but they exist alongside a strong reform foundation.
In a world searching for engines of renewed growth, India stands at the forefront, not only as a beneficiary of global change but increasingly as a shaping force in economic transformation. Its trajectory affirms that stability, ambition, and inclusive innovation can coexist as a sustainable pathway for national and global prosperity.
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