India on Track for a $26 Trillion Economy by 2047– 48

India on Track for a $26 Trillion Economy by 2047– 48

Why in News? 

According to recent projections of Ernst & Young (EY) report, India is steadily advancing toward a historic economic milestone. By 2047–48, the country is expected to emerge as a $26 trillion economy, reflecting India’s long-term vision of inclusive prosperity and global economic leadership.

Current Status of the Indian Economy

• India’s economy continues to expand strongly as of late 2025 and early 2026. Official estimates and IMF data indicate that India’s Gross Domestic Product (GDP) at current prices is around $4.1 – $4.3 trillion in 2025. This reflects a doubling of the economy over the past decade, rising from about $2.1 trillion in 2015 to over $4.2 trillion in 2025. 

• IMF data shows that this growth was achieved alongside a real GDP growth rate of approximately 6.5 % in 2024–25. India has surpassed Japan to become the fourth‑largest economy globally in nominal GDP terms, trailing only the United States, China, and Germany.

• Quarterly figures also show continued strength. In the July‑September 2025 quarter, India’s real GDP grew by 8.2 %, which exceeded economist forecasts and highlighted resilient private consumption and activity in manufacturing and services. 
• The growth is largely consumption-driven, cushioned from external headwinds like global trade uncertainties and US tariffs. Private Final Consumption Expenditure (PFCE) increased by a healthy 7.9% in Q2 FY26, indicating strong household spending and broad-based recovery.
• The Secondary Sector (including manufacturing and construction) grew by 8.1%, with manufacturing showing a sharp acceleration to 9.1%. This reflects increased industrial activity and investment.
• The Tertiary (Services) Sector continued its strong run, expanding by 9.2%, with financial, real estate, and professional services growing by an impressive 10.2%.
• India hosts 1,500 Global Capability Centres (GCCs), representing 45% of the global total. This highlights the availability of a scalable and skilled talent pool, particularly in emerging technologies, reinforcing India’s position as a hub for technology adoption and digital services.
• The presence of 1.2 billion telecom subscribers and 837 million internet users, backed by strong government support for digital infrastructure, provides a massive platform for future digital-led growth and financial inclusion.
• Services exports have been a significant driver, growing 14% over the past two decades. IT and BPO services alone accounted for a substantial $157 billion in 2021-22, demonstrating India’s deep integration into the global digital economy.

Factors Driving India’s Economic Growth

• Strong Domestic Consumption: India’s growth is deeply rooted in expanding domestic demand. Consumers across urban and rural regions are spending more on goods and services. In FY25, private consumption grew by over 7 %, making up nearly 62 % of GDP, the highest in two decades. This strong consumption trend supports sectors like retail, automobiles, housing, and FMCG products. Increased consumer spending also reflects rising household incomes and higher employment levels.

• Investment in Infrastructure: India has significantly increased public investment in infrastructure over recent years. The FY25–26 budget allocated over Rs 11 lakh crore to capital expenditure, focusing on roads, ports, railways, urban development, and logistics networks. This has created jobs and increased economic activity across regions. Infrastructure investment enhances connectivity between cities and rural areas and improves supply chains for industries. The growth in investment has also encouraged private firms to expand their operations.

• Progressive Policy Reforms: Policy reforms are central to India’s economic dynamism. Initiatives like Make in India, Production‑Linked Incentive (PLI) schemes, and reform of labour and land laws aim to simplify business operations. PLI schemes, in particular, have encouraged manufacturing in electronics, pharmaceuticals, and other key sectors by providing incentives linked to production volumes. Changes like GST 2.0, Ease of Doing Business 2.0 and Monetary easing helped India’s economic dynamism.

• Digital Transformation: India’s rapid digital adoption is reshaping its economy. Digital transactions, digital services, fintech, and information technology are growing quickly. The digital economy has become a significant share of national income. In 2022–23, digital transactions through unified platforms reached record levels, highlighting the shift toward a digital financial ecosystem.

• Foreign Investment: Foreign Direct Investment (FDI) inflows into India have been increasing. Total inflows reached approximately US$ 1.05 trillion (₹89.85 lakh crore) from April 2000 to December 2024. Investors from across the world are placing capital into Indian industries, particularly in manufacturing, technology, and infrastructure. This inflow of foreign capital brings new technology and creates employment. 

• Rise of the Services Sector: The services sector is a dominant engine of India’s growth. It contributes more than 55 % of gross value added (GVA) and includes IT, finance, tourism, and professional services. The technology and finance segments have shown strong performance through increasing exports and digital adoption. India’s services exports have grown in double digits.

• Labour Force Growth: India has one of the youngest labour forces in the world with approximately 26% of its people falling within the 10–24 age group.. A large working‑age population increases the productive capacity of the economy. This demographic dividend supports higher savings, consumption, and entrepreneurship. More workers in the labour force also help sustain growth in labour‑intensive sectors.

Challenges Facing India’s Economy

• High Unemployment: India continues to struggle with high unemployment levels despite consistent GDP growth. Youth unemployment, in particular, remains a concern. Many young people, especially fresh graduates, find it difficult to secure stable jobs. 

• Persistent Income Inequality: Large disparities in income and wealth distribution remain a key challenge for India. Data shows that the top 10 % of earners enjoy significantly higher incomes than the bottom 90 %, and this gap has not fallen sufficiently in recent years.

• Infrastructure Gaps: Despite strides in infrastructure investment, major gaps persist in transport, energy, and urban services. Many projects face delays due to land acquisition issues, regulatory hurdles, and funding constraints. Insufficient infrastructure raises logistics costs.
• Global Economic Uncertainty: India’s growth is influenced by global economic conditions. The global slowdown and geopolitical tensions can hurt demand for Indian exports such as textiles, pharmaceuticals, and IT services. Recent slowdowns in industrial order books reflect weak external demand.
• Environmental and Resource: India faces growing environmental constraints that affect long‑term economic sustainability. Water scarcity has become acute in many regions due to climate change and uneven distribution of freshwater resources. Rapid industrialisation and urban growth add to air and water pollution.

Way Forward 

India’s path ahead requires focused reforms and consistent execution. The country must strengthen job creation through manufacturing and modern services. It should expand skill development to match industry needs. Higher private investment must follow stable policies and faster approvals. The state should improve urban infrastructure and rural productivity together. Fiscal discipline must continue while increasing capital expenditure. Strong action on climate resilience and clean energy will secure long-term growth.