India’s Growth Against the Grain: Navigating Through Global Storms with Domestic Stability

By Suryavanshi IAS

While much of the world grapples with sluggish growth, geopolitical shocks, and trade volatility, India stands apart — not untouched, but unshaken. Amid rising global uncertainty, India is expected to clock a robust 6.5% GDP growth in FY2025-26, a feat few major economies can match.

This growth is not accidental — it is being carefully engineered by macroeconomic discipline, policy prudence, and resilient domestic fundamentals, even as international agencies sound caution.

🌍 Global Headwinds, Local Anchors

The international economic landscape remains troubled. Trade policy frictions, supply chain unpredictability, and regional conflicts have cast long shadows on recovery across Europe, East Asia, and the Americas.

Despite this, India continues to push forward. According to EAC-PM Chairman S. Mahendra Dev, while geopolitical and trade risks remain real, India’s domestic economic levers have become stronger and more self-reliant than ever.

“India is resilient. Even with global uncertainty, 6.5% GDP growth is feasible,” Dev asserts.

💡 What’s Fueling India's Resilience?

1. Inflation Under Control

The headline CPI inflation dropped to 2.1% in June 2025 — its lowest in over six years — aided by:

A normal monsoon, improving food supplies
Moderating global commodity prices, especially crude oil
RBI’s rate cuts and CRR easing, lowering borrowing costs

Food inflation was even negative at -1.06%, giving room for rural consumption to rise.

2. Government-Led Capital Push

The centre’s focus on capital expenditure is perhaps the most strategic growth engine:

New highways, logistics parks, and rural roads are expanding market connectivity.
Capital creation is having "crowding-in" effects — encouraging the private sector to invest.

Studies show that every ₹1 spent on capex generates more than ₹2.5 in economic output over time.

3. Private Sector Ready to Respond

The corporate sector is now healthier than it has been in over a decade:

Stronger balance sheets
Lower debt ratios
Higher cash reserves

Yet, private investment remains cautious — largely due to global demand uncertainty and excess capacity in other countries. But once global trade stabilizes and domestic demand expands further, a surge in private capex could be imminent.

📈 What About FDI and External Funds?

The global FDI inflows grew just 3.7% in 2024, far below the peak of 2015. In this context, India’s 14% increase in gross FDI in FY25 is significant.

While net FDI showed moderation due to higher repatriation, Dev emphasizes that exit is part of a mature investment cycle. For long-term capital to come in, freedom to exit is equally vital.

Importantly, external commercial borrowings (ECBs) and non-resident deposits rose in FY25, suggesting that India remains a credible and stable destination for global investors.

🔄 Supply and Demand: The Twin Engines

Supply side: Agriculture and services are performing well, with manufacturing expected to pick up as PLI schemes mature and global trade stabilizes.
Demand side: With inflation down, interest rates lower, and rural incomes improving, both urban and rural consumption are set to rise.

This combination — investment-led growth supported by consumption — is a rare strength in today’s world economy.

🏁 India’s Challenges: What Needs Work

While the macro picture is encouraging, there are critical challenges that must be addressed:

Ease of Doing Business at the state level still needs simplification.
Private investment hesitancy must be tackled with policy predictability.
Tariff uncertainties and compliance burdens hamper manufacturing confidence.
Skilling India’s youth for the evolving economic structure is essential.

The Economic Survey 2024–25 rightly called for deregulation, simplification of compliance, and stronger coordination between Centre and States.

🛤️ The Road Ahead: Sustaining Momentum

India’s growth is not just about numbers — it’s about building confidence in the country’s future. To sustain and exceed the 6.5% projection, three parallel efforts must continue:

Reform deeper, not just faster — especially in land, labour, logistics, and governance.
Balance between fiscal prudence and productive spending, especially in infrastructure and education.
Actively de-risk from global volatility — by diversifying trade, building strategic reserves, and boosting domestic innovation.

📌 Conclusion: A Moment Not to Waste

India’s resilience amidst global fragility is not merely good news — it’s an invitation to act boldly and wisely.

With inflation under control, public investment at record highs, and a private sector brimming with capacity and cash, India stands at the threshold of an industrial and economic acceleration.

What’s needed now is not caution, but calibrated confidence. The economy has shown its strength — it’s time for policies and private players to match that momentum.

A decade from now, we may look back at 2025 not as the year India avoided a crisis — but the year it chose to rise beyond it.

🎯 UPSC Focus

GS-3: Economic growth, public expenditure, inflation management, FDI, macroeconomic trends
GS-2: Role of state governments in economic development, Centre–State coordination
Essay Paper: “Resilience in an Uncertain World: India’s Economic Strategy” or “Capital, Confidence and Consumption: Building a Stronger Indian Economy”
Interview: Be prepared for discussions on inflation control, public capex impact, RBI’s monetary stance, and global FDI flows

Suryavanshi IAS

Tuesday, July 15, 2025