🇮🇳 India to Lead Global Economic Growth in 2025-26, Despite Underlying Challenges: Reuters Poll
June 27, 2025 | Pulse News
India is set to retain its status as the world’s fastest-growing major economy for yet another fiscal year, with growth projections of 6.4% in FY 2025–26 and an even stronger 6.7% for FY 2026–27, according to a recent Reuters economists' poll. This bullish forecast comes despite some pressing domestic concerns—particularly low private investment and rising youth unemployment—which threaten to limit the country’s long-term growth potential.
📈 Steady Momentum in the Face of Global Headwinds
The Reuters poll, which surveyed over 50 leading economists across Asia and beyond, revealed broad confidence in India's macroeconomic fundamentals. Strong government spending, robust domestic consumption, and a growing services sector continue to be the primary engines of growth.
India has remained remarkably resilient amid global economic uncertainty, rising interest rates, and geopolitical tensions. While many developed economies are struggling with stagnation or low growth, India has successfully maintained momentum with reforms in digital infrastructure, banking, and tax regimes.
“India is in a sweet spot, but unless structural issues like job creation and private investment are tackled, this momentum could plateau,” said Radhika Rao, senior economist at DBS Bank.
📉 Weaknesses: Private Investment and Youth Unemployment
Despite the upbeat numbers, cracks remain beneath the surface. One of the biggest concerns cited by economists is stagnant private investment, which has not kept pace with GDP growth. While public capital expenditure has surged—especially in infrastructure and energy—the same cannot be said for corporate spending.
This lack of private-sector confidence is partly due to regulatory uncertainties, global capital volatility, and the high cost of borrowing. Moreover, domestic companies are wary of over-leveraging, especially after the stress seen during the pandemic years.
Another pressing concern is the high youth unemployment rate, currently hovering around 16–18%, according to CMIE data. India has a burgeoning young population, and failure to generate sufficient quality employment could result in social unrest and wasted demographic dividends.
“We have talent, but we lack sufficient formal jobs. Skilling alone won’t fix it—we need large-scale employment generators,” noted Kunal Sen, a labor market expert at Azim Premji University.
💡 Government Measures: Reform, Resilience, and Renewal
The Indian government has taken several steps to address these concerns. Initiatives like Production Linked Incentive (PLI) schemes, Make in India 2.0, and Startup India aim to boost manufacturing and entrepreneurship. Additionally, the 2025 Union Budget earmarked significant resources toward green energy, AI innovation, and digital infrastructure—sectors expected to drive next-gen employment.
The Reserve Bank of India (RBI), while maintaining a cautious monetary policy stance, has left room for flexibility should inflation cool further. This could eventually ease credit conditions and spur investment.
Yet, many economists warn that policy implementation must be swift, transparent, and sustained.
🌍 India’s Role in the Global Economy
With China’s economy entering a phase of slower growth due to aging demographics and regulatory crackdowns, India is increasingly being seen as the next big engine of global demand. Several multinationals are shifting supply chains from China to India, which is enhancing the country’s role in global trade and investment.
India also continues to gain diplomatic weight through its G20 leadership, trade talks with the EU, and strengthened ties with the US and Southeast Asia.
🧾 Key Takeaways:
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GDP Growth Forecast: 6.4% in FY 2025–26 and 6.7% in FY 2026–27
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Strengths: Robust domestic consumption, digital innovation, and government capital expenditure
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Weaknesses: Low private investment and high youth unemployment
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Outlook: Optimistic, but requires deep structural reforms for sustainability
As India steps forward into 2026, the world will be watching not just how fast it grows, but how inclusively and sustainably it does so. If the country can harness its human capital, promote innovation, and bridge policy gaps, the dream of becoming a $5 trillion economy might be closer than ever.
🇮🇳 India Set to Lead Global Economic Growth in 2025–26, Says Reuters Poll — But Rising Challenges Cast a Shadow
By Pulse News | June 27, 2025 | Written by Sukun Patel
India’s economic engine continues to roar ahead even as the global economy struggles with persistent inflation, supply chain shifts, and geopolitical instability. According to the latest Reuters poll of over 50 leading global economists, India is projected to be the world’s fastest-growing major economy for the upcoming financial year (FY 2025–26), with GDP growth pegged at 6.4%, and 6.7% in FY 2026–27.
This comes at a time when most advanced economies like the United States, Germany, and the UK are expected to grow at less than 2%, while China continues to grapple with a property crisis and sluggish internal demand. Despite a clear growth advantage, experts warn that India's long-term trajectory may be undermined by structural weaknesses, including low private investment, unemployment among youth, and uneven rural development.
📊 The Macroeconomic Landscape: Riding on Strong Fundamentals
India’s macroeconomic resilience over the past three years has impressed analysts across the globe. Post-COVID, while many countries sank into recession or slow recovery phases, India showed consistent GDP expansion, backed by a robust services sector, public infrastructure push, and expanding digital economy.
Key sectors fueling growth include:
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Information Technology and Digital Services: India’s IT services exports continue to be strong, contributing significantly to foreign exchange reserves.
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Manufacturing: With the government’s ‘Make in India’ and PLI schemes, sectors such as electronics, semiconductors, and pharmaceuticals are witnessing increasing FDI inflows.
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Construction and Infrastructure: Government capital spending on highways, railways, renewable energy, and smart cities has created ripple effects in employment and material demand.
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Consumer Demand: A growing urban middle class and expanding rural penetration of goods and services keep domestic demand stable.
India’s fiscal deficit and inflation are being managed prudently, with the Reserve Bank of India (RBI) maintaining a cautious but supportive stance.
"India has entered a phase where momentum is self-sustaining—but it needs bold reforms to stay ahead," says Dr. Soumya Kanti Ghosh, Chief Economic Adviser at SBI.
⚠️ The Cracks Beneath the Surface
Despite headline growth numbers that surpass most peers, a deeper dive reveals critical bottlenecks threatening the sustainability of India’s growth miracle.
1. Private Investment Lag
While public investment has risen steadily, private sector investment remains tepid. The reasons are multi-layered:
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Lingering risk aversion after the COVID-19 slowdown.
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High interest rates despite RBI’s efforts.
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Regulatory bottlenecks and inconsistent state-level policies.
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Delays in land acquisition, litigation, and environmental clearances.
As a percentage of GDP, private investment has hovered around 26%, far below the required 30-32% needed to support sustained 8%+ growth.
"Unless the private sector regains confidence, the economy will remain dependent on government-led demand," warns Arvind Subramanian, former Chief Economic Adviser.
2. Youth Unemployment and Skilling Mismatch
India has one of the youngest populations globally, with over 50% below the age of 30, but this ‘demographic dividend’ is in danger of becoming a liability. Recent estimates place youth unemployment between 16%–18%, especially in urban areas.
Major concerns:
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A growing mismatch between education and industry needs.
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Saturation of low-paying or gig-based jobs with no social safety net.
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Overreliance on informal employment (nearly 80% of India’s workforce).
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Lack of scalable industrial jobs in rural areas.
Despite the presence of over 10,000 ITIs and various skilling schemes, employability remains a challenge. The demand for highly skilled professionals is rising, but semi-skilled and low-skilled workers face stagnant wages and low job security.
3. Rural Distress and Consumption
Agriculture supports over 50% of India’s population, yet contributes only about 16% to GDP. Monsoon variability due to climate change, water scarcity, and lack of crop diversification are limiting rural income growth.
Rural distress leads to:
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Lower consumption of FMCG and durable goods.
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Increased migration to already overburdened urban centers.
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Lower school retention rates and healthcare access in hinterlands.
💼 Government Policy: The Balancing Act
The government’s 2025 Union Budget focused heavily on infrastructure, clean energy, and digital expansion:
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₹11 lakh crore (approx. $135 billion) allocated for infrastructure development.
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PLI Schemes expanded to green hydrogen, solar modules, and EVs.
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Digital India 2.0 launched with new investments in AI, robotics, and 5G integration.
Additionally, programs like Startup India, Skill India, and PM Gati Shakti aim to revamp logistics, entrepreneurship, and employment ecosystems.
However, policy execution remains inconsistent, especially in rural states where bureaucratic delays and fund leakages dilute impact.
🌍 India’s Growing Global Footprint
India’s role in the global economy is expanding rapidly. As geopolitical tensions push Western companies to diversify away from China, India is benefiting from “China Plus One” strategies. Major companies like Apple, Tesla, and Samsung are increasing manufacturing footprints in India.
Diplomatically, India is:
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Playing a pivotal role in the BRICS and G20 groupings.
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Building strong partnerships with the US, Japan, Australia, and Southeast Asia.
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Enhancing strategic trade deals, such as the India–EU FTA under negotiation.
India’s stock market is also becoming increasingly attractive, with foreign institutional investors (FIIs) pouring in funds amidst strong growth outlook and political stability.
🔮 The Road Ahead: What Needs to Be Done?
To sustain its global leadership in economic growth, India must:
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Boost Private Investment: Ease of doing business, timely reforms, and predictable regulations are critical.
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Tackle Unemployment: Invest in formal jobs, vocational training, and micro-enterprises.
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Strengthen Rural India: Diversify agriculture, improve rural connectivity, and ensure inclusive welfare schemes.
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Green Growth: Ensure that infrastructure and manufacturing growth is environmentally sustainable.
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Promote Gender Equality: Increasing female labor force participation could add 1.5% to GDP, according to World Bank estimates.
🧾 Conclusion
India’s economic growth story in 2025 is a tale of contrast—global admiration at the macro level, with deep structural challenges at the grassroots. While the nation leads the charts in GDP growth, what will determine its future is not just how fast it grows, but how equitably, sustainably, and inclusively that growth is shared among its 1.4 billion citizens.
India is at a crossroads—with the right vision, reform, and execution, it can emerge not just as a fast-growing economy, but as a globally respected economic powerhouse
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