Look at most of the actions taken recently. Beginning with the union budget’s tax exemptions up to Rs 12 lakh, addresses salaried-class distress. Interest rate cuts aim to revive demand. GST rationalisation is a response to global trade tensions, particularly the Trump-era tariff battles. Yet, none of these moves are bold enough to unleash investments or spark the proverbial animal spirits. In the short term, the biggest beneficiaries are market players, not the economy’s future.
Need investment in growth engines
India remains heavily supply-side driven. Consider energy, massive solar and wind capacities are being built, but demand is hardly keeping pace. Power deficits have almost vanished, from 4.2 per cent in 2013-14 to just 0.1 per cent in 2024-25. With adequate power to run homes and factories, the question becomes: who will absorb this extra energy? Likewise, in financial services, reforms have deepened markets and enabled digital transactions. The growth of the mutual funds industry is tremendous providing humungous support to our capital market. But this money is not being channelled into productive manufacturing. These sectors are just enablers and not engines of new growth cycles like manufacturing.
All these points sound like basics of economics. All earlier investments have hit a saturation point and there are visible signs of slowing down or stagnating. To keep the engines moving, government capital expenditure has expanded threefold in the past five years, with priority sectors being roads, power, coal and mining. Private investment too, has risen about 70 per cent in the same period and may double in the next five years. Yet, private capex largely shadows government priorities – oil and petrochemicals, power, telecom, automobiles, iron and steel. But both automobiles and power are approaching saturation and their potential to absorb fresh large-scale investments is limited.
We have reached a stage where we have seen the fruition of investments made over the last 10 years. This has helped India sustain its GDP growth around the 6 to 6.3 per cent mark. Economic history shows most economies witness big shifts every 20 to 30 years depending on economic policies and investments. India itself has witnessed 3 big shifts every 20 years beginning with the early 60s. The next one is overdue. Without it, growth will remain moderate and vulnerable to shocks.
We are just about 22 years from our 100th Independence anniversary. Viksit Bharat has set the goals for 2047 – India should become a USD 30 trillion economy. This is almost 8 to 9 times the current level of USD 3.8 trillion. This means our economy has to double every 7 to 8 years. In other words, we need a nominal GDP growth of 10 per cent every year. This is simply not achievable with a consumption-led model and piecemeal reforms. The big shift is still missing!
India now needs a transformational investment-driven channelling capital into next-generation industries: advanced manufacturing, semiconductors, biotechnology, space technology, green hydrogen, artificial intelligence and climate adaptation. Only such a shift can absorb surplus power, generate high-value jobs, and create new demand cycles.