India's Growth Trajectory: Sustained Momentum and Macroeconomic Stability
Poonam Gupta, delivering the 14th Foundation Day Lecture of the Centre for Development Studies, highlighted India's sustained economic acceleration, macroeconomic stability, and resilience over the past four decades, offering a comparative cross-country perspective.
Decades of accelerating economic expansion
India's economic growth has steadily accelerated over the past four and a half decades, averaging 0.03 percentage points annually.
Real GDP growth improved from 5.7 percent in the 1980s to 7.7 percent during the last four years (2022-23 to 2025-26), excluding the COVID-19 period.
This sustained momentum is confirmed by ten-year rolling averages, showing no prolonged stagnation.
Per capita income growth has been even faster, increasing nearly tenfold from US$274 in 1981 to about US$2700 in 2024.
This rapid increase is partly due to a significant decline in population growth, which has fallen faster than the global rate since 2014.
As a result, India's share of global GDP has tripled from 1.1 percent in 1991 to 3.5 percent in 2024.
This growth trajectory is unique, contrasting with the aggregate trend of seven major emerging economies (EM7) which did not experience similar acceleration.
Virtuous cycle of growth and stability
India has experienced a virtuous cycle of accelerated growth and macroeconomic stability, with key indicators remaining healthy over four decades.
Inflation has moderated and become more stable, declining from nearly 10 percent in the 1990s to below 5 percent in the last four years under a flexible inflation targeting regime.
India's inflation differential has also narrowed against advanced and other emerging economies.
The current account deficit (CAD) has remained modest, averaging 0.5-2.2 percent of GDP since 1990, and halved to 0.75 percent in the last six years, supported by diversified inflows.
Fiscal discipline, institutionalized by the Fiscal Responsibility and Budget Management (FRBM) Act 2003, has built resilience.
Public debt, though traditionally higher, is deemed sustainable due to domestic holding, long tenors, and local currency denomination, maintaining a favorable real growth rate-real interest rate differential.
A blueprint for resilient development
India's unique combination of rapid, sustained growth and robust macroeconomic stability offers a compelling blueprint for other developing nations.
The commitment to fiscal prudence and inflation targeting, alongside demographic shifts, has fostered a predictable economic environment.
While challenges persist, this trajectory underscores the potential for large economies to achieve significant development without sacrificing stability.