To become a developed nation by 2047, a goal set under the ‘Viksit Bharat’ banner, India’s Finance Ministry says the country must achieve a real economic growth rate of 8% per year for the next decade. This growth is expected to be fueled by strong domestic demand and increased investments.
Currently, the government projects growth of 6.3% to 6.8% for the 2024-25 fiscal year, which is similar to the 6.5% growth recorded last year but significantly lower than the 9.2% seen in the 2022-23 fiscal year.
To hit the 8% growth target, the ministry also notes that India needs to boost its investment rate from the current 31% of GDP to approximately 35% of GDP.
The path to this goal faces challenges from geopolitical issues. The ministry’s estimates were made before the US imposed an additional 25% tariff on Indian goods, a move reportedly made in response to India’s oil purchases from Russia. The total 50% tariff could potentially shave up to 40 basis points off growth in 2025-26. Furthermore, recent trade talks with the US have stalled as India prioritizes access for its labor-intensive exports over opening up its agricultural and dairy markets.