Why in News: India’s economy registered 7.8% real GDP growth in Q1 of FY 2025-26 (a five-quarter high), prompting global agencies like S&P Global to upgrade India’s sovereign rating for the first time in 18 years.
Introduction
- Indian civilisation has long emphasised that turbulence precedes triumph, much like the Samudra Manthan that yielded nectar.
- India’s economic journey mirrors this philosophy: the 1991 crisis produced liberalisation, the COVID-19 pandemic spurred digital adoption, and today, despite skepticism, India demonstrates resilience, rapid growth, and inclusive development.
Current Growth Trajectory
High Growth Performance:
- Real GDP grew 7.8% in Q1 FY 2025-26, a five-quarter high.
- Broad-based growth: Manufacturing (7.7%), Construction (7.6%), Services (~9.3%).
- Nominal GDP: 8.8% growth.
Global Standing:
- 4th largest economy, fastest growing major economy.
- On track to overtake Germany as the 3rd largest economy by market exchange before decade end.
- Contributes 15% of incremental world growth; target of 20%.
Investor Confidence:
- S&P Global rating upgrade (first in 18 years) citing robust growth, monetary credibility, and fiscal consolidation.
- Lowers borrowing costs, widens investor base.
Inclusive Development
Poverty Alleviation:
- 24.82 crore people moved out of multidimensional poverty (2013–14 to 2022–23).
Foundational Services Delivered at Scale:
- Bank accounts (Jan Dhan Yojana).
- LPG connections (Ujjwala).
- Health coverage (Ayushman Bharat).
- Tap water (Jal Jeevan Mission).
- Direct Benefit Transfers empowering poor.
Model of Development:
- Consensus-building & cooperative federalism.
- Digital public infrastructure for last-mile delivery.
- Slow to announce, fast to implement → sustainable growth.
Energy Security as a Growth Backbone
Current Status:
- 3rd largest energy consumer, 4th largest refiner, 4th largest LNG importer.
- Refining capacity: 5.2 mbpd, roadmap to expand beyond 400 MTPA by 2030.
Exploration & Reforms:
- Acreage expanded to 16% of sedimentary basins (2025); target 1 million sq. km by 2030.
- 99% reduction in ‘No-Go’ areas.
- Open Acreage Licensing Policy (OALP) → transparent bidding.
- Gas pricing linked to Indian crude basket, 20% premium for deepwater blocks.
Energy Transition Measures
Biofuels:
- Ethanol blending: 1.5% (2014) → 20% (2025).
- Compressed Biogas: 300+ plants under SATAT scheme; 5% blending mandate by 2028.
- Green Hydrogen: Oil PSUs investing heavily, aligning with global climate commitments.
India’s Role in Global Oil Markets
- Russian Crude Purchases:
- Within G7/EU price cap system.
- Legal, audited, compliant transactions.
- Helped stabilise global markets, prevented $200/barrel oil shock.
Domestic Shielding Measures:
- Oil PSUs absorbed losses up to ₹10/litre on diesel.
- Tax cuts, export conditions ensured domestic supply & stable retail prices.
Structural Drivers of Transformation
Industrial & Manufacturing Push:
- Semiconductors, defence, renewables, electronics.
- PLI schemes + Pradhan Mantri Gati Shakti improving logistics.
- Japan-India semiconductor collaboration.
Digital Economy:
- UPI → global leader in real-time payments.
- Digital public infrastructure lowers friction, formalises economy.
- Start-up ecosystem → exports of innovation & services.
Future Outlook
- EY Projection: India to be 2nd largest economy in PPP terms by 2038 (GDP $34 trillion+).
Growth Pillars:
- Continued structural reforms.
- Human capital development.
- Abundant, clean, reliable energy.
Civilisational Resilience: From Green Revolution to IT Revolution, India has historically turned crises into opportunities.
Challenges Ahead
- Rising inequality amid rapid growth.
- Need for skilling to harness demographic dividend.
- Balancing energy security with climate commitments.
- Managing urbanisation and regional disparities.
Conclusion
India’s economic churn reflects the civilisational lesson that turbulence yields nectar. From crisis has come renewal — poverty reduction, digital adoption, energy transition, and resilient growth.
UPSC Relevance
GS Paper III:
- Indian Economy and issues relating to growth, development, and planning.
Mains Practice Questions
Q.“India’s recent growth performance has been described as a ‘marathoner’s economy’ rather than a sprinter’s. Discuss this statement in the light of current GDP trends, reforms, and inclusive growth measures.”