India's growth story finds its speed

India is rapidly transforming over this decade – on its way to becoming the third largest economy in a few years. Multiple factors have aligned to bring this momentum.

Over the last decade, immense progress has been made in connecting the country with new highways, airports and improved railways. Along with a mature Goods and Services Tax (GST) framework and an efficient digital toll system, such boost in infra has truly created a massive single market in the country for the first time and reduced cost of logistics significantly.

For continued progress in infra build and urbanisation, according to the Economic Survey 2024-25, India will need to spend $290 billion (Dh1.07 trillion) annually for the next five years. Initiatives such as PM Gati Shakti National Master Plan are taking away the old inefficiencies in coordination amongst various ministries on infra planning and build.

It’s not only traditional infra that has seen such a thrust, but also the new age renewable energy. Making giant strides towards a greener and cleaner Bharat, non-fossil fuel-based power generation has reached 50 per cent — 242.8 GW out of a total installed capacity of 484.8 GW — of total power generation capacity, a milestone accomplished five years ahead of its 2030 target.

The biggest benefactors of India’s push on lowering logistics cost and simplifying regulations will be the Micro, Small & Medium Enterprises (MSME) ecosystem and start-up ecosystems. With support from the Credit Guarantee Scheme, lower corporate tax rates, and simplified GST compliance, these businesses are already set on a bold course. But now, with new trade deals, they also have the chance to tap into international markets.

One of the key indicators for future growth is the positive turn in the private capex cycle.

The corporate sector capex is expected to reach anywhere between $800 billion and $850 billion. Infrastructure is slated to be at the forefront, followed by other sectors such as power and transport, where the spending will almost double in the coming years. Such capex surge coincides with massive efforts to integrate deeper into global supply chains by engaging in trade deals. Successful conclusion of a series of free trade agreements with strategic partners such as the UAE, Australia and the UK and upcoming deals with the US and the EU have set the stage for a bigger role in global trade for India.

A key offshoot of the focus on Atmanirbhar Bharat (Self-reliant India) is increasing domestic defence production. Exports soared from Rs6.86 billion to Rs236.22 billion within a decade and dedicated defence corridors in Uttar Pradesh and Tamil Nadu have attracted investments to the tune of Rs534.39 billion.

Alongside developmental projects, the success of pathbreaking programmes like Aadhaar and Digital India, have been instrumental in closing the urban-rural gap. Today, India is home to over 950 million internet users and over 644,000 villages enjoy internet connectivity, with the BharatNet initiative now linking almost 200,000 village councils. Several prominent examples of how India’s digital infrastructure is a harbinger of inclusive growth include IndiaStack, which has facilitated 67 billion identity verifications, 8.6 billion real-time mobile payments monthly, and streamlined public services.

Similarly, the Unified Payments Interface (UPI) has contributed 11.74 per cent to GDP in 2022-23 and employed 14.67 million workers.

Other path-breaking initiatives such as Open Network for Digital Commerce (ONDC) and Ayushman Bharat Digital Mission (ABDM), have democratised e-commerce for small businesses as well as ease of access to healthcare, for millions of Indians. Even as these schemes are helping build a strong, progressive India, strengthening their reach further will help realise the transformative power of technology to connect individuals and drive equitable prosperity.

A huge demographic dividend over the next two decades can be a strong tailwind for the economy if the right investments are made to develop its burgeoning human capital. Accounting for 420 million youth in 2024, which makes up for 29 per cent of the total population, it also ranks as one of the youngest economies globally. From agriculture to AI, targeted strategies are needed to generate ample employment opportunities across sectors.

Over the years, as India becomes a larger economy and more integrated with global trade, it has begun to play a more prominent role in regional and global affairs. In the current scenario of increased global economic uncertainty largely driven by the shadow of tariff wars, the challenge is to maintain resilience and ensure that these commendable economic improvements sustain. Though riddled with persisting external risks, India’s sound economic foundation, and the vision for Viksit Bharat — the government of India’s target to transform the nation into a developed entity by the centenary of its independence in 2047 — gives us reason to believe that the stars are aligning for the next phase of growth.

The writer is Head of Consulting at KPMG in India