India’s road to Viksit Bharat needs more than growth—it demands structural transformation

On May 30, North Block heaved a sigh of relief as the Indian economy clocked in 7.4% GDP growth in the fourth quarter of 2024-25. A rebound in the construction and manufacturing sectors propelled the fastest quarterly growth of the fiscal. For policymakers in New Delhi, the figures came as a much-needed reprieve as not only did the economy spring back from the lows of 5.6% growth logged in the second quarter of FY25, but the momentum continues in the current financial year, the finance ministry stated.

More than a fortnight later, on June 16, a research note from the government said, “India has become the fourth-largest global economy in 2025, driven by domestic reforms and global positioning under the vision of Atmanirbhar Bharat.” The country’s nominal GDP has more than tripled in a decade—from ₹106.57 lakh crore in 2014-15 to ₹330.68 lakh crore ($3.84 trillion) in 2024-25.

India’s growth continues to be the highest among the world’s large economies. Meanwhile, it has set its eyes on becoming a developed economy by 2047. According to the NITI Aayog’s ‘Vision for Viksit Bharat@2047: An Approach Paper’ released in July last year, the goal translates into a $30-trillion economy with a per capita income of $18,000 per annum. This means the Indian economy will have to double its size every six years, translating into a nominal GDP growth rate of around 12% from the current 9.8%.

A key milestone in the Viksit Bharat journey is to surpass Germany and become the third-largest global economy (about $7 trillion in current prices) by 2030. For this, India will have to gallop at a nominal GDP growth rate of 12.67% every year in the next five years. This begs the question—is the current real GDP growth rate of 6.5% or the nominal 9.8% sufficient to achieve the lofty goals? It may not be, say economists.

“A growth rate of 6.5% is insufficient for India to become a developed country by 2047. For a large country, this is not good enough. We need to increase our per capita income,” said Anubhuti Sahay, head of economic research at Standard Chartered, during an interaction at the Fortune India Boardroom, the theme for which was ‘The Economy–Headwinds or Opportunity?’ It was held in Mumbai on May 31.

“It needs an 8% growth. The quality of growth is far behind what one would expect,” Sahay said. At the event, economists drew attention towards issues such as muted private investment and insufficient wage growth that have a ripple effect on consumption.

The corporate sector, Sahay said, is sitting on a heap of cash but not investing. Hence, the cash pile-up with the corporate sector has not been translating into higher wages.

Madhavi Arora, chief economist, Emkay Global Financial Services Ltd, pointed out that wages have dipped below the pre-Covid levels across industries. “An absence of durable private consumption is behind the patchy private investment. Massive backloading of capital expenditure has taken place in FY25, pushing the gross fixed capital formation in Q4,” she said. “But the industry has not come up with a convincing long-term plan on capital expenditure.”

Global geopolitical uncertainty is also impacting private capital expenditure, Arora said.

Stressing that 6.5% is the trendline growth rate, the economists called for more efforts to move the productivity curve. “We have reverted to our trend growth rate of 6.5% to 6.7%. With global risks floating around, India’s FY26 growth is pegged at 6.5% with downside risks,” said D.K. Joshi, chief economist, Crisil.

According to YES Bank chief economist Indranil Pan, the growth drivers have changed. “There has been a significant capex infusion by the government after the Covid-19 pandemic. Private investments are not happening due to the global and domestic demand scenario,” he said during the event. Although India is on a stable path, it needs to put a lot more effort into moving the productivity curve, he said.

The way ahead

Deregulation, continued infrastructural investments, and sprucing up income-generating capacity may yield the 8%-plus growth rate needed to achieve the 2047 goals, suggested the economists. They also called for the private sector to think beyond trade protectionism.

“Deregulation needs to be accelerated for manufacturing to pick up. A regulatory cholesterol is the key reason manufacturing did not flourish in India compared with other countries,” said Sahay.

Sachchidanand Shukla, group chief economist at L&T India, said India needs to adopt a ‘whole-of-country’ approach towards deregulation. “The Indian economy should behave like one in terms of mindset and regulatory capacity. The Centre, states, and municipal administrations must come together with a ‘whole-of-economy’ approach,” Shukla said.

While Joshi called for investments in infrastructure, Pan said supply measures are needed to raise the bar on economic growth. “Investments in infrastructure and logistics are key to the 8%-plus growth. Labour and capital reforms are crucial. Deregulation and decriminalisation are expected to raise the growth potential in the medium term,” said Joshi.

According to Pan, the income-generating capacity, or the lack thereof, is at the root of the trouble with the Indian economy. “We are still providing free food grains and subsidies to a significant share of the population. Efficiency and productivity are linked to increasing the per capita income. That is the biggest challenge. Demand tools like monetary policy will not work, but supply measures will,” Pan said.

Arora pointed out that the private sector will also have to scale up, especially when the government is trying proactively to renegotiate the trade pacts with its trading partners. “Domestic industries need to be dynamic, and think beyond protectionism,” she said.

In essence, the possible panacea to help the economy break out of the trendline growth rate and propel it onto a higher trajectory may include measures such as deregulation, decriminalisation, continued thrust on infrastructure, and private sector dynamism to capitalise on the gains made on the trade pact front.