PYQ Relevance
[UPSC 2019] Do you agree with the view that steady GDP growth and low inflation have left the Indian economy in good shape? Give reasons in support of your arguments.
Linkage: India’s steady GDP growth of 7.8%, coupled with broad-based sectoral performance, reflects macroeconomic stability, while effective fiscal and monetary discipline underpins low inflation. The sovereign rating upgrade after 18 years validates external confidence in India’s fundamentals. These trends, along with inclusive poverty reduction, highlight that the economy is indeed in good shape. |
Mentor’s Comment
India’s economy is once again at the centre of global attention. From being dismissed as a “dead economy” by sceptics, the latest economic data, sovereign rating upgrade, and energy security achievements have painted a powerful picture of resilience and renewal. This article unpacks the recent developments in India’s economic and energy story, their significance, and what they mean for aspirants of Viksit Bharat.
Why is this issue in the news?
India’s Q1 FY 2025-26 GDP figures revealed 7.8% real growth, the fastest among major economies, coupled with a historic sovereign rating upgrade by S&P Global after 18 years. Simultaneously, India has consolidated its position as the world’s third-largest energy consumer and is spearheading a green transition. These milestones are striking because they overturn the “dead economy” narrative, highlight India’s growing share in global growth, and showcase a balance between growth, reform, and welfare, all while maintaining democratic values in contrast to authoritarian models of fast-paced growth.
Introduction
Indian civilisation has always embraced the philosophy that turbulence precedes triumph, like the Samudra Manthan, where chaos yielded nectar. Similarly, India’s economic journey has turned crises into opportunities, from the liberalisation of 1991 to the digital surge during COVID-19. Today, India stands at another inflection point. Despite global headwinds and doubts, the country is demonstrating robust growth, deepening reforms, and a secure energy base, shaping the narrative of resilience and inclusive progress.
Broad-based economic growth
- GDP expansion: Real GDP grew 7.8% in Q1 FY 2025-26, while GVA rose 7.6%, supported by manufacturing (7.7%), construction (7.6%), and services (9.3%).
- Global standing: India is the world’s fourth-largest economy and the fastest-growing major one, projected to overtake Germany by decade’s end.
- Global contribution: Independent estimates suggest India contributes 15% of incremental world growth, with ambitions to raise it to 20%.
Why the sovereign rating upgrade matters
- S&P recognition: First upgrade in 18 years, citing robust growth, fiscal consolidation, and monetary credibility.
- Lower borrowing costs: Improves India’s access to cheaper capital and widens the investor base.
- Narrative shift: Counters the label of a “dead economy,” giving credibility to India’s reforms.
Growth with inclusion
- Poverty reduction: 24.82 crore Indians moved out of multidimensional poverty between 2013-14 and 2022-23.
- Last-mile delivery: Success through bank accounts, clean cooking fuel, health cover, tap water, and direct benefit transfers (DBT).
- Democratic model: Built on consensus, competitive federalism, and digital rails, contrasting authoritarian growth models.
Energy security as a growth driver
- Global role: India is the third-largest energy consumer, fourth-largest refiner, and fourth-largest LNG importer.
- Capacity expansion: Refining capacity of 5.2 mb/d with plans to cross 400 MTPA by 2030.
- Exploration reforms: Sedimentary basin coverage expanded to 16% in 2025 (from 8% in 2021), with 1 million sq km target by 2030.
- Gas reforms: New pricing linked to Indian crude basket; 20% premium for deepwater wells boosting investment.
India’s energy transition
- Ethanol blending: Surged from 1.5% (2014) to 20% today, saving ₹1.25 lakh crore forex and paying ₹1 lakh crore to farmers.
- Green fuels: 300 compressed biogas plants under SATAT, targeting 5% blending by 2028.
- Hydrogen push: Oil PSUs driving the green hydrogen mission.
Responding to global criticism on Russian oil
- Compliance: India operates fully within G-7/EU price cap systems; every transaction uses legal, audited channels.
- Global stabiliser: Purchases prevented oil shocks and stabilised prices, aligning with Vasudhaiva Kutumbakam.
- Export reality: India has been a top petroleum exporter for decades, not a “laundromat” for Russia.
India’s digital-industrial revolution
- Semiconductors: Four new projects cleared under the India Semiconductor Mission; strengthened by Japan collaborations.
- Digital economy: India leads in real-time payments; UPI enhances small-business productivity and exports of solutions.
- Synergy: Gati Shakti logistics & digital rails reduce costs, formalise the economy, and spur consumption.
Conclusion
India’s recent performance is more than statistics, it is the reaffirmation of resilience, reform, and inclusion. The world’s doubters labelled it a “dead economy,” yet growth, energy security, digital leadership, and poverty reduction tell a different story. As reforms deepen, India is on track not just to become the world’s third-largest economy soon but also to build a model of democratic, inclusive, and sustainable growth. For India, Viksit Bharat is not aspiration, it is delivery in motion.
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