International Monetary Fund has recently revised upward their estimate for growth of Indian economy from 6.6% to 7.4 % during this fiscal year FY26. The World Bank had earlier given their forecast as 6.5%. Government of India’s National Statistical Office has forecast a growth rate of 7.4%, same as that of IMF. According to NSO, farm sector growth rate will be 3.1%, less than last year’s 4.6% but manufacturing sector is expected to score a commendable growth at 7%, higher than last year’s 4.5%. Crisis cief economist DK Pant stated that India’s growth momentum has sustained despite elevated global uncertainty due to tariff tensions, rising on accommodative monetary and fiscal policies, robust corporate balance sheets, and favourable developments such as above normal monsoons and low crude prices.
Ruchir Sharma has pointed out several weaknesses in the economy. He says that foreign investors find it difficult to negotiate the corrupt and incompetent bureaucracy for land acquisition. Also, without the flexibility to hire and fire labour they find the cost of doing business in India prohibitively high. Though a few months back the government has notified the four labour codes that were approved by parliament in 2020 it will take a while to make an impact. Sharma mentioned that due to these factors as also the turmoil in global market due to tariff tensions caused by the President Trump of the US, foreign investment has come down sharply in recent years. As against 4% of GDP of China during their boom years and of Vietnam currently India’s FDI never exceeded 1.5% of GDP. Currently it is as low as 0.1 % of GDP, one-sixth of emerging markets average. Sharma said that India should create such conducive conditions for doing business that slows down exodus of talent from India while attracts investment to boost growth.
Government has recently taken a decision to announce a package to incentivise investment in high-value manufacturing of capital goods such as heavy construction equipment and also for incentivising investment in global value chain of automobiles. A total of about Rs 23,000 crore incentive package may be announced in the coming budget.
Defence industrial sector has grown at a rapid pace in the last decade, so much so that India has emerged as a major exporter of arms and ammunition. Through its policy of Strategic Partnership, it has allowed major industrial houses like Tata, L&T and a few others to collaborate with major foreign platforms and other armament manufacturers for production within the country. Tatas have tied up with Lockheed Martin to manufacture Boing aircraft for defence purpose. Efforts are being made to collaborate Raffles’ manufacture Dassault to make those aircrafts in India. Attempts are being made to strike agreements with the US defence industries to make lethal drones and other equipment in India.
According to a study, India will emerge as a middle-income economy in the next 25 years, say by 2050. At that time, instead of four classes today (the elite comprising 50 million, middle class 250 million, aspiring class 500 million and the base 700 million) will collapse into three classes with the first two combining to become one rich class and a large middle class and a smaller aspiring class. That structure will be like a diamond with small base and a large middle with smaller top.
In the light of tariff tantrums of Trump India has rightly decided to re calibrate its economic relationship with China. Our northern neighbour which had earlier occupied the position of second largest trade partner has now (by December 2025) become the largest partner. India’s export to China grew by 33% from April till December 2025. While imports grew at even higher rate than earlier. The position o the US went down due to high tariffs of 50%.
Rahul Gandhi rightly criticised the government for not taking effective measures to protect export industries in the light of these global challenges but he should realise that these are unprecedented times when the global hegemon the US threatens not only India but even its close ally Europe with tariffs if they do not agree to his plan of acquiring Greenland which is a sovereign territory of Denmark.
By: Arun Kumar Singh
