India is the world's fastest major economy at 6.5% GDP

India's economy grew at 6.5% in FY 2025-26, according to the Advance Estimate released by the National Statistical Office — slower than the 8.2% of FY24 but still comfortably the fastest among G20 economies. The US grew at 2.8%, China at 4.8%, and the Eurozone at 1.1%. India is now a $4.1 trillion economy in nominal terms, overtaking Japan in market-exchange-rate terms to become the world's fourth-largest. The growth is led by services (which contribute 55% of GDP), government infrastructure spending (the ₹11.1 lakh crore capex budget for FY26), and domestic consumption. The challenge visible beneath the headline: manufacturing's share of GDP has stagnated at 15-17% for a decade, well below China's 28% and Vietnam's 25%, limiting the mass formal employment that could convert growth into broad-based poverty reduction.

Three engines are running. First, government capital expenditure: the union budget allocated ₹11.1 lakh crore ($133 billion) in capex for FY26, with a focus on roads, railways, and urban metro projects. This directly generates construction employment and crowds in private investment. Second, services exports: India's IT-BPM sector, financial services, and business consulting exports reached $340 billion in FY26, supported by the global AI wave that has increased demand for Indian engineering talent. Third, domestic consumption: 432 million middle-class Indians are spending more on consumer goods, travel, and experiences. The weak link is private capex — corporations are investing cautiously, wary of sluggish wage growth in the formal sector and China-level competition in manufacturing. Demographic dividend remains: India's median age of 28 vs China's 39 means a workforce still expanding for another two decades.

GDP: $4.1 trillion (nominal, market exchange rate). GDP per capita: $2,730 — still below China's $13,200 and Brazil's $9,500. Services share: 55% of GDP; employs 30% of workforce. Agriculture share: 14% of GDP; employs 45% of workforce. Manufacturing share: 17% of GDP; employs 25% of workforce. Unemployment rate (PLFS, urban): 6.7%. GST collections FY26: ₹20.5 lakh crore — a record, signalling formalisation. Forex reserves: $680 billion. India aims to reach $5 trillion GDP by FY28 — achievable at current trajectory. Richest 10% earn 57% of national income (World Inequality Report 2024). Private final consumption expenditure share: roughly 58% of GDP. Net FDI inflow FY26: about $44 billion, the highest in three years. The headline growth number sits above one of the most lopsided composition tables of any large economy.

The prosperity of India's 6.5% growth is unevenly distributed. The top 10% of earners now claim 57% of national income (World Inequality Report 2024). The formal sector — IT, finance, pharma, professional services — has seen wage growth of 8-12% per year for skilled workers. Meanwhile, real agricultural wages have grown at 2-4% per year, barely keeping pace with rural inflation. The urban-rural divide has widened: India's Gini coefficient rose from 0.45 in 2010 to 0.53 in 2024. The winners include the 5 million IT-sector employees and the 1.9 million GCC workers who earn 3-5 times the national median wage. Small and medium enterprises in manufacturing continue to struggle with cheap Chinese imports. Farmers in rain-dependent states face income volatility every year that macro GDP figures obscure. The 6.5% headline is real; so is the structural gap it cannot on its own address.

Three structural moves would convert 6.5% headline growth into broad-based prosperity. First, manufacturing pickup: the Production Linked Incentive schemes need to graduate from electronics assembly to deeper component manufacturing — without this, the manufacturing share of GDP stays stuck at 17%. Second, labour code rollout: the four merged labour codes passed in 2020 are still not fully notified at state level; once implemented they could meaningfully reduce the regulatory cost of formal hiring and shift more workers from informal into protected employment. Third, farm sector reform that lasts: storage, marketing, and crop-pricing reforms abandoned in 2021 need a politically sustainable second attempt, paired with rural skilling so people can leave agriculture if they choose. The external context will also matter: a US-China trade decoupling could either lift Indian exports or slow global growth; AI may absorb services jobs faster than expected. The next five years will decide if India's growth narrows the gap with China or widens the gap inside India.

The IMF and World Bank both project India growing at 6.5-7% through FY29, making it likely to overtake Germany as the world's third-largest economy by 2030-31. The risks to this trajectory are: a global slowdown reducing IT and services export demand; El Niño-driven agricultural disruption reducing rural incomes; oil-price spikes (each $10 increase costs India ~$14 billion in additional import costs); and domestic political shocks that slow reform. The upside scenario — where labour code implementation, infrastructure completion, and PLI success combine to lift manufacturing's share of GDP above 20% — could push India above 7.5% for several years and dramatically accelerate per-capita income convergence with China. India's 6.5% is real and its institutional foundations are stronger than in previous high-growth cycles. The honest question is whether growth's benefits can be delivered to the 45% of workers whose livelihoods still depend on agriculture and the informal sector — that is the test the next decade will score. The long-term consequence for India's place in the world hinges on this answer.

India is the world's fastest major economy at 6.5% GDP

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