Einar H. Dyvik
Research expert covering Nordics and global data for society, economy, and politics
State of the Indian economy - statistics & facts
As the world鈥檚 largest democracy, with the largest population and a GDP valued at 3.5 trillion U.S. dollars, India鈥檚 economic prowess has been closely scrutinized by the world. The South Asian giant now ranks as the fifth largest economy worldwide with a global GDP contribution projected to reach over eight percent. The fiscal year 2024, started with buoyant macroeconomic fundamentals, however, the growth momentum slowed down in the second quarter of fiscal year 2025, the slowest in six quarters. As per World Bank estimates, India needs to grow by 7.8 percent to achieve the status of a high-income economy by 2047.
As one of the largest unicorns bases globally, India is also a major repository of foreign and domestic investments. While micro-enterprises account for 95 percent of total businesses in the country, India is home to the world鈥檚 leading conglomerates such as Reliance Industries Limited and the Tata Group, vested in several important economic sectors. Schemes such as Make in India and Startup India were initiated to bolster the ease of doing business for the growing number of business enterprises in the country.
Data shows that joblessness is higher among the educated population. Skilling and capacity-building programs operated by the government have focused on improving the employability of the country鈥檚 workforce. However, a sharp mismatch remains between the labor force鈥檚 skills and the jobs created in the market. Some economists refer to India鈥檚 combination of GDP growth and stagnant employment growth as 鈥渏obless growth鈥.
Economic inequalities remain persistent in a country where the top one percent held more than 40 percent of the nation鈥檚 wealth. The most underrated risk to the Indian economy, however, is climate change. According to the Reserve Bank of India, the country risks losing 4.5 percent of GDP by 2030 due to extreme weather events.
In the long run, tapping the demographic dividend of the young working-age population through labor reforms addressing unemployment will be a game-changer for the Indian economy. Investments in education, health and care, children, and increasing the female workforce participation in the economy will help the country convert the demographic pressures into dividends.
Driving India鈥檚 growth story
The country鈥檚 young demographic profile is usually considered a key economic asset in the form of a large working-age population. Urbanization, closely tied to the expansion of the middle class is also a major driver of consumption across sectors. The growing demand for goods and services fosters new business opportunities, in turn, creating a cycle of economic growth. And with the rise of urban centers, infrastructure development has also become a cornerstone of India鈥檚 growth strategy.As one of the largest unicorns bases globally, India is also a major repository of foreign and domestic investments. While micro-enterprises account for 95 percent of total businesses in the country, India is home to the world鈥檚 leading conglomerates such as Reliance Industries Limited and the Tata Group, vested in several important economic sectors. Schemes such as Make in India and Startup India were initiated to bolster the ease of doing business for the growing number of business enterprises in the country.
Challenges for India鈥檚 leviathan economy
Despite significant progress, poverty and unemployment coupled with the increasing population remain key challenges for India. As opposed to its 鈥渄eveloped鈥, service-oriented counterparts, India is primarily an agriculture-based economy. Although the services sector contributes largely to the country鈥檚 GDP, most of the workforce is employed within the agriculture sector.Data shows that joblessness is higher among the educated population. Skilling and capacity-building programs operated by the government have focused on improving the employability of the country鈥檚 workforce. However, a sharp mismatch remains between the labor force鈥檚 skills and the jobs created in the market. Some economists refer to India鈥檚 combination of GDP growth and stagnant employment growth as 鈥渏obless growth鈥.
Economic inequalities remain persistent in a country where the top one percent held more than 40 percent of the nation鈥檚 wealth. The most underrated risk to the Indian economy, however, is climate change. According to the Reserve Bank of India, the country risks losing 4.5 percent of GDP by 2030 due to extreme weather events.
Facing the headwinds: Outlook
Despite the challenges, India鈥檚 growth projections by the IMF estimate that the Indian economy will expand by over 6.4 percent in 2025, faster than other large economies worldwide. This will mainly be driven by strong investment and consumption. The upcoming year will also be crucial for the country given US President Donald Trump's 鈥渞eciprocal tariffs鈥 announcement.In the long run, tapping the demographic dividend of the young working-age population through labor reforms addressing unemployment will be a game-changer for the Indian economy. Investments in education, health and care, children, and increasing the female workforce participation in the economy will help the country convert the demographic pressures into dividends.
