India's Economic Momentum: A Golden Phase with Critical Questions
India currently finds itself in what economists call a "Goldilocks moment." The economy shows robust growth, low inflation, and balanced macroeconomic conditions. Prime Minister Narendra Modi recently highlighted this progress at the Vibrant Gujarat Summit, noting India's position as the fastest-growing large economy with controlled inflation and record agricultural production.
The Impressive Growth Numbers
The National Statistics Office reports real GDP growth of 8.2% in Q2 of 2025-26, a significant jump from 5.6% a year earlier. Manufacturing expanded by 9.1%, construction by 7.2%, and financial services by 10.2%. Private consumption grew at 7.9%, indicating strong domestic demand.
However, the First Advance Estimates project annual growth at 7.4% for FY 2025-26, suggesting momentum may slow in the second half. This divergence between quarterly acceleration and annual projections raises important questions about sustainability.
The Growth Imperative: More Than Just Numbers
India faces a simple demographic reality. Approximately 10 million people enter the working-age population each year. To provide adequate employment and income opportunities, the economy must sustain growth above 6% annually. Anything less risks increasing job pressure, pushing more workers into informal sectors, and limiting upward mobility.
Historical examples from South Korea, Taiwan, and China demonstrate that sustained high growth over extended periods is essential for transitioning from middle to high-income status. For India's vast population, consistent growth isn't merely an ambition—it's a fundamental requirement for development.
Sectoral Imbalances and Employment Concerns
While services sectors show strong performance, agriculture projects only 3.1% growth. This weak performance in a sector that employs a significant portion of the population limits rural demand and constrains consumption-led expansion.
Employment growth continues to lag behind output growth, particularly in manufacturing and small enterprises. Without stable job creation and rising wages, consumption remains fragile and cannot serve as a durable growth engine.
Data Credibility and Measurement Challenges
The International Monetary Fund has raised concerns about India's GDP measurement methodology, including an outdated 2011-12 base year and limited informal sector coverage. The Ministry of Statistics and Programme Implementation has initiated comprehensive reforms, proposing a new 2022-23 base year and improved data collection methods.
These methodological improvements will enhance data credibility but also highlight the need for caution when interpreting strong quarterly growth figures as evidence of durable economic transformation.
Policy Support and Its Limitations
In December 2025, the Reserve Bank of India reduced the policy repo rate by 25 basis points to 5.25%, citing falling inflation and strong growth momentum. While monetary policy can stimulate borrowing and spending, it cannot generate sustainable growth on its own.
Productivity gains, employment creation, and income growth depend fundamentally on investment, skills development, infrastructure improvement, and institutional quality—factors beyond interest rate adjustments.
External Vulnerabilities and Global Pressures
India's growth faces external pressures from trade dynamics, capital flows, and currency movements. A weaker rupee may boost exports but increases import costs, particularly for energy, which quickly affects prices across the economy.
Recent episodes of rupee depreciation demonstrate that external pressures can emerge despite strong domestic numbers. This underscores that India's growth sustainability requires resilience to global uncertainties alongside robust internal demand.
The Path to Sustainable Development
For Viksit Bharat 2047 to become reality, growth must be steady, inclusive, and reliable. Job creation needs to move to the center of policy focus, especially in labor-intensive sectors and micro, small, and medium enterprises.
Rural income strengthening remains crucial, as weak agricultural performance continues to limit demand. Programs supporting rural incomes serve as important stabilizers but cannot substitute for sustainable employment generation.
Consumption-led growth will endure only when backed by stable employment and rising wages. Data credibility improvements, export competitiveness enhancement, and careful management of currency volatility all contribute to building resilient, sustainable economic progress.
India's current economic momentum provides encouragement, but the translation of strong quarterly numbers into lasting, inclusive development remains the critical challenge ahead.
