India’s Resilient Economy Amid Global Challenges

India’s economy in 2025 reflects a powerful blend of tradition and modernity. Despite global disruptions and geopolitical tensions, India has maintained strong growth and vibrant market activity. The launch of next-generation GST reforms during Sharadiya Navratri symbolises this new economic energy. This article outlines India’s economic evolution, current strengths, and challenges.

Recent Economic Context

India’s economy has defied global uncertainties, including conflicts in Gaza and Ukraine and rising US tariffs. The US imposed a 50 per cent tariff on many Indian exports, causing a 37.5 per cent decline in shipments to the US over four months. Despite this, India’s GDP growth remained robust, with rates of 7.4 per cent and 7.8 per cent in early 2025 quarters. The World Bank and IMF have upgraded India’s growth forecasts to over 6.5 per cent.

Trade and Export Dynamics

India exported $87 billion worth of goods to the US in 2024-25. Tariffs affected 55 per cent of these exports. Yet, overall exports grew 4.45 per cent in the first half of 2025 compared to the previous year. This growth was supported by strong domestic demand and public spending. The Commerce Ministry’s data shows exports reaching $413.30 billion in April-September 2025, denoting India’s expanding global trade footprint.

Domestic Market and Consumption

Private consumption’s share in GDP rose to 61.4 per cent in FY2025, the highest in two decades. This reflects increased purchasing power and consumer confidence. Vehicle sales surged, with 100,000 four-wheelers sold in 24 hours on Dhanteras 2025. Maruti Suzuki, Tata Motors, and Hyundai led this growth. Air travel also expanded , with passengers rising from 110 million in 2014 to nearly 250 million in 2025, indicating rising social mobility.

Historical Economic Transformation

India’s economic shift began post-1991 liberalisation under P V Narasimha Rao. Earlier decades were marked by socialist policies, high taxes, and supply shortages. The ‘Hindu rate of growth’ term reflected slow growth but recent research reinterprets India’s economic history as stable and harmonious. The Vajpayee era strengthened institutions, while Modi’s leadership introduced transparency, welfare reforms, and self-reliance initiatives like ‘Make in India’.

Geopolitical and Strategic Independence

India’s refusal to align fully with US demands amid the Russia-Ukraine conflict signals a new assertiveness. India emphasises sovereign decision-making in foreign policy. This stance reflects India’s confidence as a global player able to balance relations with multiple powers. The US tariffs and diplomatic pressure have not deterred India’s strategic priorities.

Institutional and Global Recognition

International bodies like the IMF and World Bank commend India’s economic resilience. Credit growth remains reasonable, and the current account deficit is near zero. India’s economy is viewed as stable and sustainable by global investors, including Goldman Sachs. This recognition positions India as force shaping the future global economy.

Questions for UPSC:

1. Critically discuss the impact of global geopolitical conflicts on India’s trade policies and economic growth in the 21st century.
2. Examine the role of economic liberalisation since 1991 in transforming India’s domestic and international economic landscape.
3. Analyse the factors contributing to India’s rising private consumption and its implications for sustainable economic development.
4. Point out the significance of strategic autonomy in India’s foreign policy and how it affects bilateral relations with major powers like the USA and Russia.

Answer Hints:

1. Critically discuss the impact of global geopolitical conflicts on India’s trade policies and economic growth in the 21st century.

1. Geopolitical conflicts like Russia-Ukraine and Gaza crises disrupted global supply chains affecting India.
2. US imposed 50% tariffs on Indian exports, causing a 37.5% decline in shipments to the US over four months in 2025.
3. India maintained robust GDP growth (7.4%-7.8% in early 2025) despite external pressures, showing economic resilience.
4. India prioritized sovereign trade policies, balancing relations without fully aligning with US demands amid geopolitical tensions.
5. Strong domestic demand, public spending, and export diversification helped offset negative impacts of global conflicts.
6. International bodies like IMF and World Bank upgraded India’s growth forecasts, recognizing its stable economic trajectory.

2. Examine the role of economic liberalisation since 1991 in transforming India’s domestic and international economic landscape.

1. 1991 liberalisation under P V Narasimha Rao dismantled socialist controls, unleashing private enterprise and entrepreneurship.
2. Shift from high taxes and supply shortages to market-driven growth and increased foreign investment.
3. Enhanced manufacturing, services, and infrastructure sectors leading to diversified economic base.
4. Improved global integration, expanding exports and attracting international investors.
5. Subsequent leadership (Vajpayee, Modi) strengthened institutions and promoted initiatives like ‘Make in India’ and self-reliance.
6. Liberalisation reversed decades of slow growth labelled as ‘Hindu rate of growth’, encouraging optimism and economic dynamism.

3. Analyse the factors contributing to India’s rising private consumption and its implications for sustainable economic development.

1. Private consumption’s share in GDP rose to 61.4% in FY2025, highest in two decades, indicating increased purchasing power.
2. Rising disposable incomes and expanding middle class fuel demand for goods and services (e.g., record vehicle sales, air travel growth).
3. Robust domestic market supports economic resilience amid global uncertainties.
4. Increased consumption drives production, employment, and investment, encouraging broad-based growth.
5. Challenges include ensuring consumption growth is environmentally sustainable and inclusive across regions and income groups.
6. Government policies promoting welfare, transparency, and infrastructure enhance consumer confidence and spending capacity.

4. Point out the significance of strategic autonomy in India’s foreign policy and how it affects bilateral relations with major powers like the USA and Russia.

1. India asserts sovereign decision-making, refusing to be pressured into choosing sides in conflicts like Russia-Ukraine.
2. Maintaining strong historical ties with Russia while engaging pragmatically with the USA reflects balanced diplomacy.
3. US tariffs and diplomatic pressures have not deterred India from pursuing independent foreign and trade policies.
4. Strategic autonomy strengthens India’s global stature as a confident, non-aligned power capable of multi-vector relations.
5. This approach safeguards national interests, enabling cooperation without compromising on core priorities.
6. India’s stance signals a shift from passive alignment to proactive, interest-based international engagement.