Elusive 8 per cent growth is back

If you are interested in economics, and your economics leans more towards the half-full-glass kind of analysis, one of the most exasperating feelings in recent times is likely to be a seemingly-elusive question. Why is the Indian economy not growing at eight per cent more often, although it is crossing the seven per cent mark in many quarters? Economists will tell you that the necessary conditions and, as jargon puts it, the sufficient conditions are in place. Yet, for some reason, India has failed to breach the eight per cent mark on a sustained basis, either quarterly or annually.
This is indeed quite frustrating, more so after the country released the GDP figures for the second quarter of this fiscal year, which crossed eight per cent on the back of GST 2.0. Once again, as several times in the past, the numbers prove that India has an uncanny habit to combat global and other headwinds, and achieve growth rates that seem neither realistic, nor achievable. But let us leave the eight per cent issue for a moment, although we will come to it later, and focus on both history and the future.

Let us look at India’s growth when it faces adverse factors, and experts seem unenthusiastic, as also the predictions for the next two quarters. First, simple arithmetic. At this stage, I can stick my neck out, and say that the GDP growth in 2025-26, despite the ongoing disruptions and tensions, is likely to be seven per cent, or more. Obviously, this is considerably higher than what the Reserve Bank of India, International Monetary Fund, and other global institutions have forecast. So, how do I reach this conclusion?
In the first two quarters of this fiscal year, the GDP growth has aggregated 16 per cent. As anyone knows, the annual number over four quarters is the aggregate sum divided by four. Based on the figure provided by the IMF, and others, if India grows at 6.5 per cent annually, it implies that the aggregate of the four separate quarters will be 26 per cent. However, the country has already clocked 16 per cent in the first two quarters of the year.
All that India needs, over the next half year, is an aggregate growth of 10 per cent, or an average of five per cent each quarter. Given the recent track record of the economy, five per cent seems more like a gross underestimate. Let me provide two examples to illustrate this assertion, and India’s ability to defy adverse and pessimistic predictions. In 2022, Russia had invaded Ukraine. There were a lot of global headwinds. There were other problems. For instance, the estimates related to private capital investments were subdued.
Hence, most analysts, experts, and economists forecast that the economy would be lucky to grow at more than five per cent in 2022-23. The actual figure stunned the cynics and pessimists, as well as the optimists. The economy grew at an unbelievable seven per cent. The story was repeated the next year. There was a presumption that the growth momentum had slowed down, and GDP would take a beating. There were reasons to justify it. Despite the huge investments in infrastructure development, largely by the government, private investments were weak.
In addition, consumer sentiments were bottled up. Buyers were reluctant to open their purses. What happened due to these factors? The GDP grew at a stunning 8.2 per cent in 2023 24. Yes, it is true that reality finally caught up in the next year, and the economy slowed down to a more expected figure of 6.5 per cent. This was because the positive effects of massive infrastructure spending had paid off, and without a sustained rise in consumer spending, a further increase in growth was not possible.
This year’s sentiments started with a whimper. After the 6.5 per cent, there were trade disruptions. The US tariffs of 50 per cent were deemed to hurt exports. Back home, consumer spending crawled. Most buyers postponed big-ticket purchases. Yet, the GDP growth in the first quarter of the fiscal was an astounding 7.8 per cent, although it was below eight per cent. Then came the GST 2.0 regime, which was preceded by the monumental announcement related to personal taxes in the year’s Budget, when the finance minister raised the exemption limit to `12,00,000 a year.
October, 2025, turned out to be a record year for consumer purchases. Two-wheeler sales, which languished since 2018, shot up to more than three million units. One can argue that the GST effect on October sales is a one-off. But it did ignite consumer sentiments. Once buyers open their wallets, it is difficult to gauge the positive effects, and the implications and consequences. I personally feel that the consumption story is back on track, and is likely to remain buoyant. The second quarter momentum is likely to carry on.
This means that in the coming two quarters, the GDP growth rate will surely be higher than five per cent each. In fact, the overall annual growth rate is likely to be seven per cent, or higher than the global and domestic estimates. Now, we come to the final point, which is the lament that despite headwinds, despite the economy’s resilience as proven in the recent past, why cannot the GDP grow by eight per cent, and get stuck in the seven per cent groove?
The reason, perhaps, is that the country is not seriously chasing the low-hanging economic fruits. There is not enough space in this column to highlight the several possibilities, but let me highlight one of them. In 2024, after a record year, India earned $35 billion from the foreign tourists. One can consider this to be a formidable figure, and quite an achievement. I feel that it is a cruel joke. For a country the size of India, and the varied and beautiful destinations that it has, 20 million tourists a year is an under-achievement.
Over the last decade, India invested hundreds of billions of dollars in infrastructure. It created dozens of new airports. It pumped money to run dozens of modern trains. Connectivity improved dramatically. Network connectivity, including WiFi and data services, improved drastically. Why cannot India launch a serious mission to grab the low-hanging tourism fruit? India’s diaspora is huge. We can easily make them business partners in a sustained effort to increase the foreign exchange earnings from tourists from $35 billion to $100. It will easily add a percentage point to GDP growth. It is a mystery why such simple things are not being considered.

The author has worked for leading media houses, authored two books, and is now Executive Director, C Voter Foundation; views are personal