India’s economy in 2025 demonstrates remarkable strength and resilience. Despite global uncertainties and scepticism, India’s GDP growth has hit a five-quarter high with broad-based expansion across sectors. The nation is now the world’s fourth-largest economy and fastest growing among major powers. This growth is underpinned by robust energy security, digital innovation, and strategic reforms.
Recent Economic Growth Trends
India’s real GDP grew 7.8% in the first quarter of the fiscal year 2025-26. Manufacturing, construction, and services sectors all showed strong gains. Nominal GDP rose 8.8%, reflecting higher consumption and investment. Public infrastructure spending and logistics reforms have reduced costs and boosted productivity. India is set to surpass Germany to become the world’s third-largest economy by decade’s end. It already contributes over 15% of global incremental growth.
Social Impact of Economic Expansion
Between 2013-14 and 2022-23, nearly 25 crore Indians escaped multidimensional poverty. This progress is linked to increased access to basic services such as banking, clean fuel, healthcare, and water. Direct cash transfers have empowered the poor. India’s democratic and federal structure supports consensus and competitive governance. Digital platforms ensure last-mile delivery of services, enabling inclusive growth.
Energy Security and Production Capacity
India ranks third in global energy consumption and fourth in refining capacity and LNG imports. Refining capacity exceeds 5.2 million barrels per day with plans to expand further. Energy demand is expected to double by 2047, accounting for 25% of global incremental demand. Exploration acreage has doubled since 2021, and licensing reforms encourage transparent investment. New gas pricing policies incentivise deepwater and new wells.
Energy Transition Initiatives
India is accelerating its shift to cleaner energy. Ethanol blending in fuel has risen from 1.5% in 2014 to 20% in 2025, saving foreign exchange and benefiting farmers. Over 300 compressed biogas plants are being deployed, targeting 5% blending by 2028. Public sector companies lead green hydrogen development. These efforts align with sustainable and affordable energy goals.
Global Oil Market Role and Compliance
India’s purchase of Russian crude complies with international price caps and regulations. It has not violated sanctions and uses legal channels for transactions. India has stabilised global oil markets and prevented price spikes. It remains a major petroleum product exporter and supplies fuel to Europe amid sanctions on Russia. Domestic price controls and subsidies have shielded consumers from global volatility.
Technological Advancements and Digital Economy
India’s semiconductor sector is expanding rapidly with new manufacturing projects approved. Strategic partnerships, including Japanese investments, support resilient supply chains. The digital economy, led by the Unified Payments Interface, enhances productivity and formalisation. Startups contribute to service exports and innovation. Integration of digital and physical infrastructure creates a virtuous cycle of investment and consumption.
Future Economic Outlook
Projections indicate India could become the world’s second-largest economy by 2038 in purchasing power parity terms. This growth depends on continued reforms, human capital development, and clean energy access. India’s approach balances rapid growth with democratic inclusion. The government’s vision focuses on delivering tangible benefits to all citizens, especially the underserved.
Questions for UPSC:
- Discuss in the light of India’s economic reforms since 1991 how liberalisation has shaped its current growth trajectory.
- Analyse the role of energy security in sustaining economic growth. Taking example of India’s energy policies, discuss the challenges and opportunities.
- Examine the impact of digital infrastructure on economic formalisation and inclusive growth in developing countries.
- With suitable examples, critically discuss the significance of international compliance and diplomacy in global energy markets.
