India's Economic Resilience in a Fragmenting World
The global economic landscape has experienced a profound transformation in recent years. The era of deep globalization, marked by free trade, integrated supply chains, and global sourcing, has been replaced by a more fragmented and protectionist environment. Escalating geopolitical tensions, regional conflicts, and strategic competition have prompted major economies to implement tariffs, non-tariff barriers, and export controls, particularly on critical raw materials like semiconductors, rare earths, energy inputs, and advanced technologies.
These developments have significantly disrupted global supply chains, increased costs, and heightened volatility for businesses worldwide. The impact is evident in global growth figures, with world GDP growth moderating to around 3%, down from the 3.8–4% average seen in the pre-2010 decade. Advanced economies are now growing at a much slower pace of approximately 1–1.5%.
India's Standout Performance
Against this challenging global backdrop, India's economic performance has demonstrated remarkable resilience. India has emerged as the fastest-growing major economy, with an estimated growth rate exceeding 7% in FY26, despite facing significant global headwinds. This momentum is supported by strong domestic consumption, sustained government capital expenditure—now surpassing ₹11 trillion and accounting for over 3.4% of GDP—and ongoing structural reforms.
Today, India contributes nearly 16% of global growth, highlighting its increasing importance in the world economy. However, while India has performed well, there is a recognition that ambitions must be set higher. To achieve long-term sustained growth comparable to China's high-growth decade between 2003 and 2013, when it consistently grew at 9–11% annually, India needs to accelerate manufacturing, deepen industrial capabilities, and significantly expand its share in global value chains.
The Manufacturing Imperative
Manufacturing currently contributes about 17–18% of India's GDP, compared to 25–30% during China's peak growth years. This gap underscores the urgency of localization, the Atmanirbhar Bharat initiative, and the creation of resilient domestic supply chains. Building local ecosystems for critical components, electronics, energy systems, and advanced materials is the most effective response to global volatility.
Automotive Sector: A Case Study in Potential
The automotive sector exemplifies India's growth potential when policy alignment and market demand converge. Measures such as personal income tax rationalization, GST corrections, and a relatively supportive interest rate environment have boosted consumer sentiment. As a result, India has become the third-largest automobile market globally, with annual vehicle sales exceeding 25 million units.
Yet, India's automotive opportunity remains at an early stage when viewed structurally. India's car ownership stands at just around 44 cars per 1,000 people, compared to 300+ cars per 1,000 in developed economies and 150–200 in several emerging markets. This stark gap highlights the enormous headroom for long-term growth as incomes rise, urbanization accelerates, and mobility aspirations expand. It is this structural under-penetration that provides confidence in sustained demand growth for the automotive sector over the next decade and beyond.
Technological Transformation in Mobility
Simultaneously, the auto industry is undergoing a fundamental transformation. Consumers now demand advanced safety, digital interfaces, connectivity, and technology-rich features. Electronics account for 35–40% of vehicle value, up from less than 20% a decade ago. ADAS, connected platforms, advanced lighting, power electronics, and software-defined architectures are becoming mainstream. The EV transition is further accelerating this shift, with EV penetration expected to rise from 6–7% today to 15–20% by 2030 across segments.
Looking ahead, growth momentum in the automotive sector is expected to continue into the next financial year and beyond. After decades, we are witnessing a phase where almost all major OEMs are expanding capacities. Investments in EVs, new platforms, and advanced technologies will remain strong drivers of growth and localization.
The Critical Role of Artificial Intelligence
Another critical dimension of India's future competitiveness is artificial intelligence. While India boasts strong digital talent and a vibrant startup ecosystem, it currently lags behind the US and China, both of which are investing tens of billions of dollars annually in AI infrastructure, foundational models, and compute capacity. AI will be a decisive force multiplier across manufacturing, mobility, logistics, healthcare, and governance.
India must accelerate efforts to build AI capabilities through investments in compute infrastructure, data ecosystems, skilling, and industry-led use cases. Catching up is not optional; it is essential to sustaining productivity-led growth.
Policy Enablers and Future Outlook
I remain optimistic about India's growth trajectory through FY27 and beyond. Government policy will continue to be a critical enabler. In the upcoming Union Budget, continued focus on infrastructure, manufacturing incentives, R&D support, EV ecosystem development, MSME integration, and technology-led skilling can significantly enhance India's competitiveness. A sharper policy thrust on AI adoption and domestic capability creation will further future-proof the economy.
India's next phase of development will rest on five core reform pillars:
- Accelerating manufacturing and industrial competitiveness for Make In India.
- Supporting MSME growth.
- Enabling technology- and AI-led innovation.
- Strengthening infrastructure and logistics.
- Advancing sustainability and the energy transition, and deepening ease of doing business through regulatory reforms.
Together, these pillars provide a comprehensive framework for building a resilient and future-ready economy. The world may be fragmenting, but this moment presents India with a historic opportunity. With the right mix of policy, industry action, and technological ambition, India can emerge not only as a fast-growing economy but as a globally competitive, innovation-driven economic powerhouse.
Disclaimer: Views and opinions expressed in this article are solely those of the original author and do not represent any of The Times Group or its employees.
