India’s economy may be the fastest-growing among major nations but sustaining that momentum will require deft management of inflation, trade realignment, capital flows and the energy transition, a parliamentary panel has cautioned.
The Standing Committee on Finance, chaired by Bhartruhari Mahtab, in its Twenty-Sixth Report on the “Roadmap for Indian Economic Growth in Light of Global Economic and Geopolitical Circumstances,” painted a picture of resilience tempered with risks. The report underscored that while strong domestic demand and public investment have kept growth steady, global volatility and structural challenges demand a sharper long-term strategy.
Growth Still Firm, But Uneven
India’s GDP expanded by 6.5 percent in FY25, extending its position as the fastest-growing large economy. The committee credited high public capital expenditure in infrastructure, a robust services sector and steady private consumption as the key drivers. It noted India’s growing share in global output — contributing 16 percent of world GDP growth in 2024, up from 11 percent in 2019 — as evidence of its rising weight in the global economy.
Yet, the report warned that competitiveness gaps in manufacturing, skill mismatches and execution bottlenecks could slow the pace. With global demand subdued, India’s ability to capture supply chain diversification opportunities hinges on reforms in regulation, research and development, and workforce skilling.
Inflation and Price Stability
Inflationary pressures remain a persistent concern. While headline CPI averaged 5.2 percent in FY25, food inflation stayed elevated, driven by pulses and vegetables. The committee credited monetary policy discipline and government market interventions — including releases from buffer stocks and the expanded “Bharat” brand distribution of essentials — for containing price spikes.
A bumper harvest has lifted foodgrain stocks to 749 LMT against a buffer norm of 210 LMT, providing comfort. Above-normal rainfall forecasts also bode well for price stability. Still, the panel cautioned that climate volatility, global oil shocks and supply disruptions could quickly upset the balance, urging deeper investment in agriculture and logistics to prevent recurring food-price surges.
Trade and Geopolitics
Exports, at $437.4 billion in FY25, were largely flat, reflecting fragile global demand. The United States remained India’s largest buyer at $86.5 billion, while shipments to China fell nearly 15 percent. The committee observed that while U.S. tariffs may have a limited direct impact on India, the wider proliferation of trade restrictions is a structural risk that cannot be ignored.
Talks with Washington on “Mission 500” — doubling bilateral trade to $500 billion by 2030 — were flagged as critical. The panel also endorsed the diversification push under the 2023 Foreign Trade Policy and “Districts as Export Hubs” initiative but warned that rivals from Southeast Asia and Latin America are moving fast to capture global manufacturing share.
Capital Flows and Investor Confidence
Foreign direct investment has remained steady, with Singapore accounting for nearly 30 percent of inflows in FY25, though much of this originates from other jurisdictions. The panel highlighted India’s inclusion in global bond indices as a milestone that will attract more passive portfolio inflows.
At the same time, it warned that capital flows remain vulnerable to interest-rate shifts in advanced economies and called for continued regulatory reforms to anchor investor confidence. “Continued FPI inflows are reflective of the innate strength of India’s macroeconomic fundamentals,” it noted, but stressed the need for vigilance.
Energy Transition as Strategic Imperative
Perhaps the most forward-looking part of the report is its focus on energy. The committee said India cannot meet its growth aspirations without accelerating the shift to cleaner sources, with nuclear and renewables forming the backbone. Budget allocations have risen sharply: ₹25,091 crore ($3 billion) for nuclear in FY26 and ₹12,000 crore ($1.45 billion) for renewables, more than double the FY22 level.
The panel welcomed the National Green Hydrogen Mission’s ₹10,000 crore ($1.2 billion) funding and production-linked incentives for solar and battery manufacturing. But it stressed that execution and financing gaps remain large, urging deeper private participation through public-private partnerships and green finance markets.
At the same time, it warned that millions of livelihoods in coal-based industries are at risk, calling for reskilling and region-specific strategies to ensure a just transition.
Resilience Anchored in Foresight
Mahtab and his panel framed the challenge as one of balance: sustaining growth without fueling inflation, diversifying exports without succumbing to protectionism, attracting capital while guarding against volatility, and driving an energy transition that is both fast and fair.
“The energy transition, trade diversification and price stability are integral to sustaining growth and safeguarding competitiveness in a changing global order,” the report concluded.
India’s near-term position looks secure, buoyed by strong consumption and healthy harvests. But the Standing Committee’s message is that resilience cannot rest on buffers alone — it must be anchored in foresight, investment and structural reform.
