India, often hailed as one of the world’s fastest-growing economies, is facing a slowdown that has sparked widespread debate. From agriculture to Information Technology (IT), the country’s growth story has evolved over the decades, with certain sectors thriving and others lagging. In this analysis, we delve into the key drivers of India’s growth, evaluate the impact of policy shifts, and explore the critical gaps that have hindered the country’s economic trajectory. By examining data trends, government initiatives, and sectoral shifts, this article offers a deeper understanding of the forces shaping India’s current economic landscape.
India’s economic landscape has transformed significantly since its post-independence days. Initially, agriculture was the backbone of the economy, with a majority of the population dependent on farming. However, the last few decades have seen a major pivot towards the services sector, particularly Information Technology (IT). This shift has led to substantial changes in employment trends, education, and economic growth.
Despite the prominence of IT, the Indian education system has not sufficiently aligned itself with the demands of the manufacturing sector. The government’s “Make in India” initiative, launched in 2014, aimed to bolster manufacturing and make India a global manufacturing hub. However, manufacturing still contributes only 17.7% to India’s GVA, a relatively stagnant share considering the government’s push for industrialization. The focus on large industries has largely overshadowed the micro, small, and medium enterprises (MSMEs) that form the backbone of the industrial sector.
While the manufacturing sector did experience a 9.9% growth in FY24, this was after a contraction of -2.2% in FY23, signaling that growth is uneven and far from the desired trajectory. India’s ambition to become a global manufacturing hub has faltered largely due to policy inconsistencies and a failure to implement industry-specific reforms.
The Economic Survey notes that while credit growth to the MSME sector has been positive, the structural issues persist.
The IT sector, which once served as the crown jewel of India’s economic success, is now facing several challenges. While the services sector continues to grow, concerns are mounting about the sector’s ability to sustain momentum in the face of global economic uncertainties and domestic policy issues.
The stock market has become a focal point for many Indians seeking wealth outside of traditional career paths. Since the pandemic, the stock market has seen an influx of retail investors, many lured by the promise of easy money. This has led to a distraction from productive work across sectors.
Nitin Lodha, Principal Consultant: “India’s economic trajectory is at a critical juncture. While the country’s IT and services sectors have made tremendous strides, it’s essential to focus on the forgotten pillars—agriculture and manufacturing. Without a holistic approach to these sectors, India risks losing its competitive edge in the global economy. It’s time for policymakers to align the workforce and industrial sectors to ensure sustainable growth for the future.”
One of the most significant shifts in recent years has been in the agriculture sector, where rising land prices have led to demotivation among farmers. As land prices soar, many farmers have opted to sell their land for substantial profits rather than continue farming. This trend has been particularly harmful in rural areas where farming was once the primary source of livelihood.
India’s economic trajectory has been hampered by a lack of cohesive long-term planning. While individual sectors have received attention—such as the push for IT growth and manufacturing expansion—there has been no unified national vision to guide their development. This fragmented approach has led to policy inconsistencies, with initiatives in one sector often clashing with those in another.
Vishal Shah, Head India MSME: “The MSME sector, which forms the backbone of India’s industrial growth, is facing structural challenges that have been ignored for too long. We must focus on providing MSMEs with the right infrastructure, access to credit, and support from the government to unlock their true potential. Only then can India truly become a manufacturing hub and create the jobs needed for its growing population.”
India’s economic slowdown is the result of multiple factors, including policy gaps, rising inflation, and a shift in focus from professional work to speculative trading. The country’s growth trajectory has been stunted by fragmented policies, lack of skilling alignment, and the rise of easy money. To regain momentum, India must adopt a long-term vision, address policy inconsistencies, and realign its education and skilling frameworks with the needs of its industrial sectors. With the right reforms, India can overcome these challenges and continue on its path to becoming a global economic powerhouse.
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