India is growing at a pace that stands out in a slowing global economy, but the shine hides deep structural weaknesses.
Its GDP grew 7.8% in the second quarter, outpacing China. Industrial production hit records, and inflation fell below the Reserve Bank of India’s target. Yet the country looks ill-prepared for Trump’s 50% tariffs on Indian exports, and without reforms the gains may prove fragile.
The core problem in India is jobs. It needs 12 million new positions each year to absorb its youth workforce, but official unemployment data are unreliable and likely understate the scale of underemployment.
Manufacturing remains below 16% of GDP, despite PM Modi’s decade-old “Make in India” push.
Employment has instead tilted toward less labor-intensive sectors such as IT and finance, leaving the demographic dividend underutilised.
Inequality is also worsening, with World Inequality Lab estimates the gap may now rival levels seen under colonial rule. While billionaires multiply, large sections of the population remain excluded from the benefits of growth.
Yardeni Research and the OECD warn that Modi’s model has emphasized attracting big-ticket investments and showcasing global firms’ supply-chain pivots rather than raising productivity and human capital.
Policy tweaks, such as cutting goods and services tax rates and lowering interest rates, have boosted consumption. But India needs deeper reforms. The OECD says strengthening social safety nets, rationalizing subsidies, expanding the tax base, and raising female labor participation by improving childcare, transportation, and workplace protections.
More trade liberalization, smoother customs processes, and easier access to long-term finance for smaller firms would also help sustain investment.
India’s resilience comes from a young population, high savings, and relatively modest debt. These advantages position it to thrive if the government can confront its weakest link: jobs and inclusivity.
Without tackling these gaps, 7% growth will not be enough to withstand tariff shocks or deliver prosperity broadly.
Structural reform, not just macro momentum, will decide whether India reaches its much-touted $20 trillion future, says Yardeni analysts.
Source :
https://www.investing.com/news/economy-news/why-india-is-in-dire-need-of-structural-reforms-4231810
