Context:

The global economy is currently passing through a phase marked by volatility, geopolitical tensions, rising trade protectionism, and monetary tightening. In such a challenging international environment, India’s economy advancing with high growth, declining inflation, and falling unemployment is not a matter of coincidence. Rather, it reflects the cumulative outcome of structural reforms undertaken over the past decade, a strengthened institutional framework, and a domestic demand–led growth model.

• • • The 8.2 per cent real GDP growth recorded in the second quarter of FY 2025–26, the decline in unemployment to 4.7 per cent in November 2025, and CPI inflation reaching historically low levels together place the Indian economy in a rare “Goldilocks period” one in which growth is sufficiently strong while inflation remains well contained.

Accelerating Economic Growth:

• • • The most notable feature of India’s recent growth trajectory is that it is predominantly driven by domestic factors. Unlike export-dependent economies facing mounting pressures amid a global trade slowdown, India’s growth momentum has been sustained by robust private consumption, improving urban demand, and enhanced public capital expenditure.
    • The rise in GDP growth during the second quarter of FY 2025–26 to a six-quarter high underlines that India’s economic expansion is not fuelled by temporary stimuli but rests on structural strength. Continuous government investment in **infrastructure—roads, railways, logistics, and digital networks—**has not only generated short-term demand but has also boosted long-term productivity and encouraged private investment.
    • India’s domestic growth rate has been supported by several factors, including strong internal demand, simplification of income tax and GST, easing crude oil prices, prioritisation of capital expenditure by the government, and favourable monetary and financial conditions arising from low inflation. In this backdrop, the Reserve Bank of India’s upward revision of its FY 2025–26 GDP growth forecast from 6.8 per cent to 7.3 per cent reflects policymakers’ confidence in India’s domestic economic fundamentals.

Employment Scenario:

• • • For a young country like India, economic growth is meaningful only when it translates into employment generation. Economic activity and employment are complementary: as growth accelerates, higher production of goods and services raises labour demand, creating more job opportunities and reducing unemployment. In this context, India’s declining unemployment rate is a clear indicator of the strength of its economic momentum.
    • In November 2025, the unemployment rate (on a Current Weekly Status basis) for persons aged 15 years and above declined to 4.8 per cent, down from 5.4 per cent in October 2025, marking the lowest level since April 2025. This decline has been driven primarily by a significant reduction in female unemployment. Among urban women, unemployment fell from 9.7 per cent to 9.3 per cent, while among rural women it declined from 4.0 per cent to 3.4 per cent.
    • Overall, rural unemployment fell to a new low of 3.9 per cent, while urban unemployment declined to 6.5 per cent, indicating improving labour market conditions across regions.

Inflation Management:

• • • The Consumer Price Index (CPI) measures changes in the prices of a basket of goods and services typically consumed by households. In 2025, India experienced a broadly favourable inflation environment. CPI inflation declined from 4.26 per cent in January 2025 to 0.71 per cent in November, highlighting the effectiveness of India’s inflation-targeting framework.
    • The moderation in food prices, effective supply-side management, and timely monetary interventions ensured price stability. This benign inflation environment provided the Reserve Bank of India with policy space to consider a reduction in the repo rate, reflecting the growing maturity and balance of India’s macroeconomic management.

Trade and the External Sector:

• • • Despite global recessionary concerns, India’s external sector has remained remarkably resilient. Sustained growth in merchandise exports—particularly engineering goods, electronics, pharmaceuticals, and petroleum products—demonstrates India’s manufacturing competitiveness and its increasing integration into global value chains.
    • By November 2025, merchandise exports rose to USD 38.13 billion, underscoring continued external sector performance despite global trade constraints. Key contributors to export growth in 2025 included cashew, marine products, other cereals, electronic goods, engineering goods, and petroleum products, many of which recorded their highest growth rates in over a decade.
    • Services exports have remained a major pillar of external stability. The steady expansion of IT and business services has helped contain the current account deficit. Foreign exchange reserves exceeding USD 686 billion provide a strong buffer against external shocks. Furthermore, by strengthening trade partnerships with the United Kingdom, Oman, and New Zealand in 2025, India has diversified export markets and expanded its global trade footprint.

Investment Flows and Global Confidence:

• • • Between April and September 2025–26, India’s investment and growth outlook showed significant strengthening, reflecting rising domestic and international confidence. During this period, gross FDI increased by 19.4 per cent, from USD 43.4 billion to USD 51.8 billion, while net FDI surged by 127.6 per cent, rising from USD 3.4 billion to USD 7.7 billion. This sharp increase was largely driven by reduced capital repatriation and stronger long-term investment inflows.
    • Although Foreign Portfolio Investment (FPI) has remained volatile due to global financial uncertainty, long-term capital inflows such as FDI reaffirm the robustness of India’s economic fundamentals and the credibility of its structural reforms.
    • International institutions have echoed this optimism, projecting India’s growth rate to remain within the 6–7.5 per cent range between 2025 and 2027, suggesting that India will continue to rank among the fastest-growing major economies in the years ahead.
    • Overall, sustained international confidence, strong domestic demand, declining unemployment, and controlled inflation together provide a solid, stable, and credible foundation for India’s progress towards its long-term development goals for 2047.

Challenges:

• • • Despite the encouraging outlook, several structural challenges persist:
      • Generation of high-quality and high-productivity employment
      • Better alignment between skill development, education, and labour market needs
      • Sustained improvement in agricultural productivity and rural incomes
      • Increasing the share of high-value manufacturing in exports
      • In addition, climate change, geopolitical risks, and global financial volatility may influence future growth prospects. Therefore, continuity of reforms, cooperative federalism, and sustained investment in human capital must remain central priorities of policymaking.

Conclusion:

India stands at a critical economic juncture where high growth, controlled inflation, and improving employment outcomes coexist. This represents not merely a current achievement but a strong foundation for the coming decades. If the momentum of reforms is maintained and growth is made more inclusive and sustainable, the goal of a developed India by 2047 can become a realistic and attainable outcome.