How can India’s growth story be turned to tangible benefits

India's growth story has strong potential to be a global game-changer in the next five years, fueled by a unique combination of sustained domestic demand, strategic policy reforms, and a burgeoning digital economy. However, the nation must overcome significant challenges like high unemployment and infrastructure gaps to fully realize its potential.

India's growth could be a game-changer over the next five years by leveraging its massive domestic market, demographic dividend, and digital infrastructure to become a global economic powerhouse. To do so, India must overcome significant challenges like global economic headwinds and domestic issues with job creation and infrastructure.

India’s economic growth has often been described as unique and for good reasons. Unlike many global economies where exports dominate the overall GDP, India’s engine is powered primarily by domestic demand. This makes consumption not just a cyclical driver, but a structural pillar of growth. As investors, it is important to recognize that India’s consumption journey is more than just a short-term trend. It is the outcome of powerful, long-lasting shifts in demographics, income, aspirations, and technology. Together, these factors create a fertile ground for businesses that cater to the demand from India’s 1.4 billion people.

For continued progress in infra build and urbanization, according to the Economic Survey 2024-25, India will need to spend USD 290 billion annually for the next five years.

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 (242.8GW 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 MSME ecosystem and startup 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 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.

India is home to over 950 million internet users and over 644,000 villages enjoy internet connectivity, 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.

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.

India’s logistics and e-commerce sector, for example, is growing on the back of a rock-solid digital backbone. Agriculture is seeing tech-driven reinvention—think drones, soil sensors, and direct-to-market apps. And don’t ignore manufacturing: the Production Linked Incentive (PLI) scheme is giving a boost to electronics and mobile phones. In 2024, India became the world’s second-largest mobile phone producer, behind China.