The widespread Gen Z-led protests last month over the National Eligibility cum Entrance Test (NEET) paper leaks brought the spotlight back on them and their demands concerning the future. This demographic dividend must be carved out with immediate and effective measures and policies.

“The youth have an immense role to play in the journey toward a Viksit Bharat,” Prime Minister Narendra Modi said, delivering his 13th Independence Day speech from the ramparts of the Red Fort. “We have to link the goal of a developed India with our youth and move forward. We have to make the youth our highest priority,” the Prime Minister said, adding that in the next one year, one crore youth would be trained in artificial intelligence (AI). 

Modi also said that free online coaching programmes for various competitive examinations would be undertaken by the government, a move that would help reduce the financial burden on poor and middle-class families.

On the macro numbers, India - the fastest growing major economy - is on course with a growth rate of 7.8% in the January-March quarter. With the target being to achieve Viksit Bharat status by 2047, however, India would need to press the pedal on growth. Not just that. Growth needs to be inclusive, touching every segment of society and business.

Modi outlined the Sapta Dhara or 'seven streams' -  manufacturing, food processing and agriculture, technology, infrastructure or ‘gati shakti’, defence, green energy, and soft power - that will drive India’s next growth phase.

India’s Growth Number Not Enough

India’s growth in the last five years has remained above 6.5%. 

The country, often described as the bright spot or the sweet spot however faces challenges. In 2022–23, the economy grew by 7.6%, and jumped to 9.2% in 2023–24. Thereafter, the growth rate moderated to 6.5% in 2024–25, before rebounding to 7.7% in 2025–26. The Reserve Bank of India has projected the economy to grow at 6.7% in the current financial year.

The overall picture is one of healthy, continuing growth in the economy, but not linear.

The challenge is this: the current growth rate is not sufficient to propel India into the league of developed nations by 2047. According to a World Bank report, India will need to grow at 7.8% on a sustained basis to achieve high-income status by then.

The journey in the next few years will be arduous for India. Economists and policymakers have underlined the need to bring in much-needed reforms to boost businesses and social development and steer through multiple risks.

As per current indications, India will remain ahead of China in terms of economic growth in FY2026-27 too. However, the US-Iran war and the ongoing crisis in West Asia could leave a long-lasting scar on India’s growth story.

The fuelling prices have already started to put pressure on the Current Account Deficit (CAD).

Though India is also much ahead of its BRICS peers, including Brazil, Russia, and South Africa, it cannot be complacent.

The economy is not without pressure points, especially the value of the Rupee which has been weakening persistently over the years and is currently trading around 95-96 to a dollar. 

The other major area of concern is inflation. While the Consumer Price Index (CPI) or retail inflation is within the Reserve Bank's comfort zone, the Wholesale Price Index (WPI) is surging and is near the double-digit mark. Of greater concern is the impact of the West Asia crisis, which will keep policymakers on their toes. They will have the onerous task of managing the rising expenditure on fuel, fertiliser, and other subsidies without sacrificing fiscal prudence. 

WPI Nearing Double-Digit Mark 

The CPI, or retail inflation, has remained within the comfort zone of the Reserve Bank of India, which was mandated to keep it at 4% with a margin of 2% on either side. It increased gradually from 2.7% in January to 3.2% in February, 3.4% in March, 3.5% in April, 3.9% in May, and 4.4% in June. Currently, retail inflation is not a cause for concern. 

The view changes when one looks at the graph of wholesale inflation.

The Wholesale Price Index (WPI) is spiralling at a pace not witnessed in the recent past. It jumped from 1.2% in January to 2.2% in February and 4% in March and then almost doubled to 8.4% in April. The momentum continued as the WPI inflation in May climbed to 9.7% and neared the double-digit mark of 9.9% in June.

The wide variation in the two indices does not augur well for the price situation in the coming months. At some point, the impact of higher wholesale prices will spill over to retail, hurting the pockets of the common man.  The possible rise of retail inflation will also have a bearing on the Reserve Bank’s monetary policy.  The central bank has maintained the status quo on the benchmark interest rate, or repo rate, at 5.25% since December 2025, and may be compelled to tighten monetary policy in the eventuality of CPI catching up with the WPI, albeit with some time gap. 

Rupee Decline 

The declining value of the Rupee has been a sore point for the present government. It declined from ₹62 to a dollar in 2014 to 95-96 currently. The decline has been secular with the exception of 2021, during which the rupee appreciated following a decline in trade, subdued crude oil prices, an overall decrease in demand following the pandemic outbreak, and aggressive rate cuts by the central banks of advanced economies to neutralise the impact of the pandemic.

It stood at approximately ₹81.3 per dollar in 2022, depreciated to ₹82 in 2023, and weakened further to ₹84.8 in 2024. The pace picked up thereafter, with the exchange rate moving to ₹88.6 per dollar in 2025 and around ₹96 in 2026.

The rupee now trades at the weakest exchange rate, around ₹95–96 per dollar, creating yet another challenge for policymakers in the backdrop of the other macroeconomic issues.

Former Planning Commission Deputy Chairman Montek Singh Ahluwalia told The Secretariat, “If India does well, the rupee will strengthen.” In the same breath, he cautioned, "If you try to strengthen it [the rupee] artificially, the economy will become weaker.” 

The main factors that have been influencing the value of the market-driven Indian currency are crude oil prices, trade deficit, foreign investment (portfolio as well as Foreign Direct Investment [FDI]), remittances, interest rates, Reserve Bank policies, inflation, movement of the US Dollar Index, and geopolitical developments.

If you try to strengthen it [the rupee] artificially, the economy will become weaker

- Montek Singh Ahluwalia, former Deputy Chairman of the erstwhile Planning Commission 

Export Growth Plateaus

India's exports of merchandise products have remained relatively static for the past five years, mainly on account of geopolitical factors. Exports rose from US$ 422 billion in FY2021–22 to a five-year high of US$ 451 billion in FY2022–23, before slipping to US$ 437 billion in FY2023–24.

 It was US$ 437 billion in FY2024–25 and rose slightly to US$ 441 billion in FY2025–26. This is an improvement over the previous two years, but is US$ 10 billion less than the five-year high recorded in FY2022–23. Indian exports have been hit by the fluid geopolitical situation, the Trump tariffs and more recently the crisis in West Asia. The US and the Gulf are the biggest export destinations of Indian merchandise.

The government has been trying to push exports through various incentive schemes and Free Trade Agreements (FTAs). According to UNCTAD’s Trade and Development Report 2025, India ranks third among Global South economies in terms of the diversity index of trade partnerships. 

India has inked FTAs with various countries and is working to finalise the pact with the US. In January, India concluded an FTA with the European Union, which was hailed as the ‘Mother of All Deals’. During the course of the year, the trade pacts have been concluded with the UK, Oman, and New Zealand. In addition, India has completed the first round of trade negotiations with Israel and formally launched trade talks with the GCC (Gulf Cooperation Council). Efforts are also on to expand its trade negotiations agenda with the 11-member Association of Southeast Asian Nations (ASEAN), Mexico, and Canada.

India-EU FTA: India and the European Union concluded negotiations for FTA in January 2026. Structured as a modern, rules-based trade framework, the agreement aims to address contemporary global economic challenges while enabling deeper market integration between the two major economies.

India-Oman CEPA: India signed a Comprehensive Economic Partnership Agreement (CEPA) with Oman in December 2025, marking a significant step in strengthening economic engagement with the Gulf region. The agreement opens new export opportunities for India’s labour-intensive sectors such as agriculture, textiles, leather, gems and jewellery, engineering, pharmaceuticals, and automobiles.

India-New Zealand FTA: Concluded in 2025, the India-New Zealand FTA stands out as one of India’s fastest-concluded trade agreements, strengthening economic engagement between the two countries. The agreement enhances market access and tariff preferences for Indian exports to New Zealand while also positioning the partnership as a gateway to the wider Oceania and Pacific Island markets.

India-UK CETA: India and the UK signed the Comprehensive Economic and Trade Agreement (CETA) in 2025, marking a milestone in their long-standing economic partnership. Bilateral trade between the two countries has already reached US$ 56 billion, with both sides aiming to double this level by 2030. The agreement is also expected to boost India’s agriculture and processed food exports, which are projected to grow by over 50% in the next three years.

India-European Free Trade Association: India signed the Trade and Economic Partnership Agreement (TEPA) in 2024. It became effective in October 2025. The agreement incorporates commitments directly linked to investment flows and job creation.

India-UAE CEPA: Signed in 2022, the India-UAE CEPA marked India’s first such accord in the Middle East and North Africa (MENA) region, ushering in a new era of strategic economic cooperation between the two countries.  The agreement was concluded with the potential to raise bilateral trade to US$ 100 billion over five years while creating substantial employment and business opportunities in both economies.

India-Australia ECTA: The India-Australia Economic Cooperation and Trade Agreement (ECTA) signed in April 2022 marked India’s first trade agreement with a developed economy in over a decade, signalling a renewed momentum in expanding partnerships with advanced markets. A key milestone was the signing of a Mutual Recognition Arrangement on organic products, which facilitates smoother trade and reduces compliance costs for exporters. 

A host of other FTAs are also in the negotation stage.

A Look At FDI Numbers 

Foreign Direct Investment (FDI) inflows stood at US$ 84.83 billion in 2021–22 before falling to US$ 71.36 billion in 2022–23 and remaining almost unchanged at US$ 71.28 billion in 2023–24. The recovery was evident in 2024- 25, with inflows increasing to US$ 80.62 billion, and an even stronger recovery to US$ 94.50 billion in 2025-26. This is the highest in the five-year series, following a low two years ago and an increase over the 2021-22 level.

The numbers however do not reflect the complete picture.

The impact of FDI flows is being neutralised by the outflow of portfolio investments. In fact, the FDI trajectory resembles a revolving door, as the record inflow is accompanied by significant capital outflow. According to official data, foreign investors repatriated or disinvested a record US$ 53.6 billion in 2025-26 after withdrawing US$ 51.5 billion a year earlier.

At the same time, Indian companies accelerated overseas investments, taking outward FDI to US$ 33.3 billion.  

Conclusion 

The Indian economy presents a mixed picture as the country enters the 80th year of Independence and marches ahead to achieve the goal of Viksit Bharat by 2047. Though India remains the fastest growing major economy in the world, the nation cannot brush aside the fact that its currency is constantly weakening and near the psychological mark of 100 to a dollar. Policymakers will have to work overtime to prevent further devaluation of the domestic currency and neutralise the impact of the ongoing West Asia crisis, especially on inflation and fiscal deficit.