• India’s economy has shown notable resilience despite the West Asia (Middle East) conflict and associated oil price shock.
• Recent data indicates GDP growth for the last quarter could touch nearly 8%, defying fears of a slowdown.
• Experts caution that much of this pick-up is cyclical (driven by tax cuts, rate cuts and credit) rather than structural, making deeper reforms essential for sustained long-term growth.

1. Coordinated Policy Stimulus

• Direct tax cuts in February increased disposable income.
• GST rationalisation in September simplified taxation and reduced the tax burden on some sectors.
• Policy rate cuts of around 150 basis points made loans cheaper for businesses and consumers, alongside regulatory easing in the financial sector.

2. Acceleration in Non-Oil Exports

• The Real Effective Exchange Rate (REER) depreciated by nearly 15%, making Indian products more competitive.
• Lower US tariffs improved India’s access to the US market, while resilient global growth boosted demand.

3. Swift Response to the West Asia Conflict

• India diversified energy sources — importing crude from Russia and LNG from the US and Oman — and imported around 17% more energy than normal as a buffer.
• Government finances absorbed much of the oil-price increase instead of passing the full burden onto consumers, but this pressures the fiscal deficit.

1. Investment Challenge

• Low investment rate: fixed investment is around 32% of GDP, while private corporate investment is only 10–11%.
• Declining public investment: government capex growth fell from 30% (2020–23) to 11% (2024) and just 1.6% (2025).
• Weak private investment: companies remain cautious amid weak demand, 75–76% capacity utilisation and strong Chinese competition.

2. The Employment Challenge

• Service export growth has halved to 8% (from 16% earlier); IT sector employment has been broadly flat, partly due to AI.
• Per PLFS data, a significant share of new jobs are “self-employed” rather than salaried — a quality-of-employment concern.

3. The Credit-Fuelled Consumption Risk

• NBFC lending to households is growing at 20%; unsecured personal lending has risen to 25% momentum, on top of rising household leverage.

4. Labour vs Capital

• India is increasingly substituting machines/AI for workers; creating jobs needs better education, skills and healthcare, simpler labour laws, and support for labour-intensive sectors (textiles, food processing, manufacturing).

5. Export Challenge

• Goods exports have fallen from 17% to 11% of GDP over the past decade, despite FTAs, tariff cuts and a more competitive rupee.