As India prepares to elevate its status to the world’s fourth-largest economy, a remarkable journey from the tenth position in 2014 is being celebrated. With a Gross Domestic Product (GDP) that has nearly doubled from an estimated $2.0 trillion to approximately $3.9 trillion, this economic leap is a significant milestone, acknowledged by the International Monetary Fund (IMF). By 2026, it’s projected that India’s nominal GDP will reach around $4.19 trillion, surpassing Japan and marking a pivotal moment in its economic history.
Despite the rapid growth—India’s economy is expected to expand by 6.2% in 2025 and 6.3% in 2026—questions about inclusivity persist. The latest figures from the National Statistics Office (NSO) indicate a growth slowdown to 6.5% for FY25, marking the slowest rate since the pandemic. However, analysts believe India will remain the fastest-growing major economy, supported by improving domestic consumption.
This remarkable growth raises pertinent questions: Who truly benefits from this economic surge? While India strides towards becoming a $5 trillion economy, the average per capita income remains low, prompting a broader examination of wealth distribution and inequality within the nation.
### What Has Driven This Growth?
The engine of India’s economic success can be attributed to several structural adjustments and strategic investments. Analysts highlight prudent fiscal and monetary policies as foundational for stable GDP growth. Key reforms, such as the Goods and Services Tax (GST) implemented in 2017 and corporate tax cuts in 2019, have streamlined business operations, encouraging investments.
The manufacturing and construction sectors have also contributed significantly to the GDP growth, reflecting heightened industrial activity and infrastructure development. Government initiatives like “Make in India” and substantial public capital expenditure have spurred industrial growth, enhancing overall economic resilience. Furthermore, global supply chain shifts stimulated by US-China trade tensions have made India an attractive destination for investment.
However, as Manoranjan Sharma, Chief Economist at Infomerics Ratings, pointed out, while these developments are commendable, the processes behind economic growth must be equitable. The rapid expansion of the economy, particularly in ranking, needs to be accompanied by measures addressing poverty, unemployment, and income distribution imbalances.
### Is This Growth Inclusive?
India’s position as the fourth largest economy is impressive, but the pressing concern is its inclusivity. Despite maintaining an average growth rate of 6% to 7% since 2004, the per capita income is dishearteningly low. A closer examination reveals that while nominal GDP figures are impressive, they do not tell the full story of wealth distribution within the nation.
India’s per capita GDP remains considerably low, ranking it outside of the top 100 countries globally. Moreover, when considering purchasing power parity (PPP), which illustrates the economic situation in terms of what individuals can afford, India’s position further declines relative to developed nations. While India officially became the world’s third-largest economy in PPP terms before recent achievements, its nominal state reflects vast discrepancies in per capita earnings compared to countries like the United Kingdom.
### The Employment Dilemma
The informal sector dominates India’s labor market, comprising approximately 90% of the workforce, significantly undermining per capita income gains. Moreover, low female workforce participation—only 26% compared to a global average of 47%—diminishes the potential for inclusive economic growth. Nevertheless, data indicates a decrease in unemployment rates, having fallen from 8.9% in 2018 to approximately 4.9% by 2025.
### What Lies Ahead?
To ensure sustainable and inclusive growth, India must continue refining its structural dynamics. Maintaining a commitment to comprehensive development requires investments in skill development, employment generation, and financial inclusion. Analysts recommend that the government take on an active role, focusing on broadening economic growth to ensure that all sections of society feel the benefits of this prosperity.
Strengthening the Micro, Small, and Medium Enterprises (MSME) sector, creating an environment conducive to inclusive development, and leveraging the roles of financial institutions are vital steps toward addressing economic inequality.
In conclusion, while India’s economic journey over the past decade is commendable, deeper questions remain regarding the inclusivity and sustainability of this growth. The upcoming path toward becoming a $5 trillion economy should not merely focus on numbers, but rather on how these figures positively affect the lives of all Indians. For India to position itself as a true economic superpower, growth must extend beyond the wealthiest layers of society, fostering opportunities and equitable progress for the entire population.
Source link
