India - Growth amid global storms

India’s economic growth appears to be regaining momentum, according to a recent report by HSBC Mutual Fund. The report highlights several domestic factors-including low interest rates, healthy liquidity, a decline in crude oil prices, and a normal monsoon-that are supportive of a pick-up in economic activity. “Growth cycle in India may be bottoming out. Interest‑rate and liquidity cycles, decline in crude prices and normal monsoon are all supportive of a pick‑up in growth going forward,” the report said, signaling optimism for both private and public sector investments.

I ndia’s journey to a $4 trillion economy reflects resilience and transformation. At independence in 1947, the nation faced poverty, famines, and a literacy rate of just 12 percent. Nehru’s state-led industrialization laid infrastructure but growth stagnated under the License Raj, with only the Green Revolution offering success. The 1980s brought early reforms, computers, and telecom expansion, yet by 1991 India faced a severe financial crisis. Landmark reforms dismantled the License Raj, liberalized trade, and welcomed foreign investment, fueling exports and entrepreneurship. The 2000s IT boom turned Bengaluru, Pune, and Hyderabad into global tech hubs, driving high growth. Despite crises in 2008 and 2020, India rebounded, achieving nine percent growth post-pandemic and crossing the $4 trillion milestone by 2025—a testament to decades of policy-driven structural transformation.

$4 Trillion milestone amid historical challenges

India has officially crossed the $4 trillion economy mark, a landmark achievement considering centuries of colonial exploitation under British rule, which drained resources and hindered structural development. Today, India’s growth reflects resilience, structural reforms, and strategic policymaking. Yet this milestone is even more remarkable when viewed against India’s historical context. On August 15, 1947, at the stroke of midnight, Jawaharlal Nehru’s voice echoed through Parliament: “Long years ago, we made a tryst with destiny…” India had achieved freedom, but beneath the celebrations lay a harsh reality, an impoverished, divided nation. In the 1700s, India contributed nearly 24 percent of global GDP, earning the title “Golden Bird.” By independence, that share had fallen below 4 percent. Famines, food shortages, and a literacy rate of just 12 percent defined the new republic, and life expectancy stood at 32 years. To build a future, India first had to survive its present.

In the decades following independence, India pursued state-led industrialization under Prime Minister Nehru. Steel plants, dams, and banks were built through Soviet-inspired five-year plans. While these initiatives laid essential infrastructure, the License Raj stifled private enterprise, requiring permissions for everything from pins to telephone lines. Economic growth stagnated at around three percent, the so-called “Hindu rate of growth.” The Green Revolution of the 1960s marked a turning point, transforming looming famines into food security and highlighting India’s capacity to overcome structural challenges.

Whispers of reform in the 1980s

The 1980s brought early signs of economic liberalization. Rajiv Gandhi’s tenure introduced computers, expanded telecommunications, and deregulated sectors like textiles. Growth rose to five to six percent, and urban prosperity began to flicker. Middle-class families acquired their first Maruti Suzuki cars and color televisions, signaling the rise of consumer modernity. Yet by 1991, India faced its worst financial crisis since independence, with foreign reserves sufficient to cover only two weeks of imports, prompting the airlift of gold to London as collateral.

1991: The Turning Point

Under Prime Minister P.V. Narasimha Rao and Finance Minister Dr. Manmohan Singh, India dismantled the License Raj, reduced trade barriers, devalued the rupee, and welcomed foreign investment. Growth rebounded, exports surged, and entrepreneurs found wings. These reforms laid the foundation for a modern economy that could integrate with global markets.

The IT boom and Global Integration

By the 2000s, India had emerged as a global IT powerhouse. Bengaluru, Pune, and Hyderabad became hubs for multinational back-office operations. Companies like Infosys, TCS, and Wipro became household names, and between 2003 and 2008, GDP growth averaged 8.8 percent, outpacing many peers. India’s integration into the global economy strengthened its resilience, enabling the country to withstand shocks such as the 2008 global financial crisis and bounce back to nine percent growth by 2010.

Post-Pandemic promise

The 2010s saw record consumption, cheap credit, and a booming services sector. Yet growth slowed by 2019, and the pandemic in 2020 caused a GDP contraction of 7.3 percent, the worst in forty years. India rebounded swiftly, achieving nine percent growth in 2021, driven by vaccination campaigns, exports, and digital adoption. By 2025, India crossed the $4 trillion milestone, becoming the fourth-largest economy globally.

Global forecasts highlight India’s strength

Major international institutions continue to highlight India’s comparatively strong outlook. The OECD projects real GDP growth of 6.3 percent in fiscal 2025‑26 and 6.4 percent in 2026‑27, noting that private consumption will strengthen as real incomes rise amid moderate inflation, tax cuts, and a strengthening labor market. In a recent revision, the OECD raised India’s FY26 growth forecast to 6.7 percent, attributing the upgrade to monetary and fiscal easing and GST cuts. The IMF projects 6.6 percent growth in 2025 and 6.2 percent in 2026.

Policies driving growth, but external pressures bite

India’s current growth momentum reflects decades of structural reforms and bold domestic policies. GST rationalization, monetary easing, fiscal incentives, and the Production Linked Incentive (PLI) scheme have strengthened manufacturing, encouraged private investment, and fueled renewable energy expansion. Yet global pressures, including U.S. tariffs since September, geopolitical uncertainties, and supply chain disruptions, remain significant headwinds. Analysts note that while domestic drivers are robust, challenges in exports, global demand, and private capital expenditure have increased, suggesting that growth projections may present only a partial picture of reality.

Comparing India globally

Despite external challenges, India continues to outperform other major economies. China is expected to grow by 4.7 percent in 2025 and 4.3 percent in 2026, while the United States is forecast at 1.8–1.7 percent. The global average for emerging and developing economies is about 4.0–4.5 percent, highlighting India’s resilience amid global uncertainty. Strategic domestic policies and targeted investment incentives have provided buffers, but sustaining momentum will require careful navigation of tariffs, slowing global demand, and geopolitical risks.

India’s structural transformation is reflected in tangible metrics. Services contribute 50 percent of GDP, manufacturing 28 percent, and agriculture 13 percent. Per capita income has risen from ₹250 in 1947 to nearly ₹2 lakh in 2025, while life expectancy has more than doubled from 32 to over 70 years. UPI transactions in 2024 reached 172 billion, five times Visa’s global volume and aviation carried 174 million passengers, making India the third-largest aviation market globally. Equities remain attractive, with valuations modestly above the ten-year average, underpinned by medium-term growth expectations and high industrial capacity utilization.

Despite these milestones, India faces sharp inequality, rural distress, unemployment, and the looming threat of climate change. Yet the nation retains a key advantage: its youth. With nearly half the population under 30, India’s future will depend on effectively educating, employing, and empowering its young citizens. Balancing inclusive growth, climate resilience, and economic momentum is essential for sustaining its trajectory.

From famine to food surpluses, from telegrams to terabytes, from colonial poverty to post-pandemic promise, India’s journey is a testament to resilience and strategic foresight. Crossing the $4 trillion mark is not merely an economic milestone, it reflects centuries of perseverance, reform, and policy-driven transformation. The Golden Bird is airborne again, yet its flight depends on navigating domestic inequalities and global uncertainties while harnessing the potential of its youth, ensuring that India’s growth remains inclusive, sustainable, and forward-looking.